This article is written at a time when I am taking loans in rupees and paying in dollars. It just pains me so much that because of the govt's short sightedness I need to spend more of my currency for mere survival. Coming directly to the point, the issue of depreciating rupee is of concern not only to me but to most of fellow country men. There have been economic advisory meetings, there has been interviews with Standard and Poor's representatives, RBI governor, our own 'Mum'mohan singh and Pranab Mukherjee. There have been discussions about policy paralysis with respect to current world economic scenario as well as in essential service sectors like Retail and Aviation. With all due respect to all those economic experts whose thoughts would be of much value, I really feel they miss the whole picture here. Let's look at the scenario.
The bulk of our foreign exchange comes from export of software and other IT enabled services.And a major chunk of the reserves go in buying oil from the international market for our needs. The consumption of oil and related products by India is only increasing and that too exponentially. When our consumption increase obviously our foreign exchange reserves are going to drain out. Considering the Eurozone crisis and Barack Obama's tilt towards discouraging outsourcing of jobs from America it is too much for the IT and ITeS sectors to compensate for the outflow of cash.
Atleast Dr. Singh has accepted the fact that amendments need to be made from inside and not in external policies. A one off loosening of law against the Vodafone acqusition tax issue is neither going to solve the problem nor going to bring back enormous investors confidence on India. It seems the decision making machinery runs on the time frame of coalition politics and not on economic implications. Having a coalition partner like TMC is like having a prosthetic leg that is full of infections. Of course its gonna lift you for the time being while forming the government but is definitely going to kill you in the long run. The announcement of FDI in retail and the later withdrawal coupled with the bad timing of the vodafone decision are standing examples. If you have decided on an issue, you shouldn't go back on it due to coalition pressures.
Next comes the aviation sector. If the AI-IA merger is anything to go by, IAS officers aren't necessarily great managers or CEOs in today's market. The lesser it is talked about the better. Combined with promotion of poor business models in new green field airport projects and revenue curtailing taxation from all departments it is only bleeding the airlines of the little foreign exchange they have. Kingfisher is already packing all its suitcases to leave. To sum up the plight of this sector, 'The govt hasn't understood the industry and the industry hasn't understood the market'.
Now these things will take a long time to clean up and therefore the revenue stream will continue to be plugged in terms of forex. Coming to the most critical part, spending of forex reserves by oil companies is never gonna reduce. If this is the biggest hole in the tank the only way to keep the tank full is by plugging the hole and not by trying to add temporary hose pipes. All the decisions taken now are like hose pipes with limited input. The only solution to this is for us to reduce the dependance on oil. How long are we going to continue importing oil from whatever the rates the OPEC countries sell? We have to face the problem and fight it head on. Instead of spending so much on subsidies the govt can start with investing in future energy research. We just can't wait for the westerners to develop each and every technology that we need and expect them to give it for free. We have the need now and we need to do it now. Diesel and petrol based public transportation system must slowly be phased and replaced with hybrid and other clean energy based systems. Hybrid and electric vehicle technology must be publicised and its importance explained at every possible stage. Investment in renewable energy must be increased exponentially and for god's sake be given to private sector and not public sector.
There will be lobbies against the aforementioned points from different sectors. To start with, most political parties will be against FDI in retail and the big auto industry will be against the shift towards renewable energy when Ashok Leyland, Daimler, Navistar, Mahindra, Tata etc have just recently invested hell a lot of money here. The solution is to work with them, and give incentives like a promise of minimum market atleast by the govt to buy the new technology that had come up with.
After all these scams and licking of coalition boots, this is the only way out. Attending G20 meets and heading ASEAN, BRICS and lobbying for a permanent seat in Security Council is just going to bring reputation and not respect and results. For the latter to happen, the govt needs to be stern and innovative in its policies and decisions and all the way.
The bulk of our foreign exchange comes from export of software and other IT enabled services.And a major chunk of the reserves go in buying oil from the international market for our needs. The consumption of oil and related products by India is only increasing and that too exponentially. When our consumption increase obviously our foreign exchange reserves are going to drain out. Considering the Eurozone crisis and Barack Obama's tilt towards discouraging outsourcing of jobs from America it is too much for the IT and ITeS sectors to compensate for the outflow of cash.
Atleast Dr. Singh has accepted the fact that amendments need to be made from inside and not in external policies. A one off loosening of law against the Vodafone acqusition tax issue is neither going to solve the problem nor going to bring back enormous investors confidence on India. It seems the decision making machinery runs on the time frame of coalition politics and not on economic implications. Having a coalition partner like TMC is like having a prosthetic leg that is full of infections. Of course its gonna lift you for the time being while forming the government but is definitely going to kill you in the long run. The announcement of FDI in retail and the later withdrawal coupled with the bad timing of the vodafone decision are standing examples. If you have decided on an issue, you shouldn't go back on it due to coalition pressures.
Next comes the aviation sector. If the AI-IA merger is anything to go by, IAS officers aren't necessarily great managers or CEOs in today's market. The lesser it is talked about the better. Combined with promotion of poor business models in new green field airport projects and revenue curtailing taxation from all departments it is only bleeding the airlines of the little foreign exchange they have. Kingfisher is already packing all its suitcases to leave. To sum up the plight of this sector, 'The govt hasn't understood the industry and the industry hasn't understood the market'.
Now these things will take a long time to clean up and therefore the revenue stream will continue to be plugged in terms of forex. Coming to the most critical part, spending of forex reserves by oil companies is never gonna reduce. If this is the biggest hole in the tank the only way to keep the tank full is by plugging the hole and not by trying to add temporary hose pipes. All the decisions taken now are like hose pipes with limited input. The only solution to this is for us to reduce the dependance on oil. How long are we going to continue importing oil from whatever the rates the OPEC countries sell? We have to face the problem and fight it head on. Instead of spending so much on subsidies the govt can start with investing in future energy research. We just can't wait for the westerners to develop each and every technology that we need and expect them to give it for free. We have the need now and we need to do it now. Diesel and petrol based public transportation system must slowly be phased and replaced with hybrid and other clean energy based systems. Hybrid and electric vehicle technology must be publicised and its importance explained at every possible stage. Investment in renewable energy must be increased exponentially and for god's sake be given to private sector and not public sector.
There will be lobbies against the aforementioned points from different sectors. To start with, most political parties will be against FDI in retail and the big auto industry will be against the shift towards renewable energy when Ashok Leyland, Daimler, Navistar, Mahindra, Tata etc have just recently invested hell a lot of money here. The solution is to work with them, and give incentives like a promise of minimum market atleast by the govt to buy the new technology that had come up with.
After all these scams and licking of coalition boots, this is the only way out. Attending G20 meets and heading ASEAN, BRICS and lobbying for a permanent seat in Security Council is just going to bring reputation and not respect and results. For the latter to happen, the govt needs to be stern and innovative in its policies and decisions and all the way.
