Why We Should Worry..?

Why We Should Worry

In India, we have done everything possible to shoot ourselves in the foot. I am a ‘scaredy cat’. So should you be if you looked at the economic data. Pray. But remain scared

Omkar Goswami

 

 Scaredy cat! Scaredy cat! Can’t catch a rat!” When we were kids in junior school, that is what was chanted with healthy spite and fervent maliciousness if you backed off from anything or were proven to have clay feet. My confession in matters economic is that I have become a ‘scaredy cat’.

I don’t know how many people realise it, but India is in a very difficult place. Its deterioration from global envy to pathos and titter is huge. And the overhang will continue even after we recover, if we at all do under the present political dispensation.

A good place to begin is the rest of the world, whose ebbs and flows determine how global capital expands or retreats with clicks of the mouse. Let us start with the world’s worst-performing allegedly advanced nation: Greece. Its real GDP is expected to shrink by 7.1 per cent in calendar year 2012 compared to 2011. Its current account deficit now runs at almost 7 per cent of GDP, making India’s — at 4.5 per cent — look positively brilliant. Guess where its interest rate on 10-year government bonds are? It is above 26 per cent — well over the usurious daily rates that moneylenders charge fish, vegetable and fruit sellers at the bazaars of Mumbai and Delhi.

Unemployment is running at almost 22 per cent. With more than one out of five adults in Greece without jobs, one wonders how long the new political dispensation can last  before the people start burning cars and pelting cops at  Syntagma Square.

But Greece is only 2.5 per cent of the euro zone’s GDP, you might say. So, let us move on to Spain and Italy — two of the big four, with France and Germany. Spain’s GDP is expected to contract by 1.6 per cent in 2012. Its unemployment is close to 25 per cent, the highest in the euro zone. Its budget deficit is 6.5 per cent with Prime Minister Rajoy having little or no ability to cut back.  Spanish T-bills are being hocked at almost 6.3 per cent; and it has provincial banks that have almost 70 per cent exposure to real estate loans, whose bad debts are many times higher than what they recognise.

Italy is also in deep trouble: the forecasted GDP for 2012 is expected to shrink by 2 per cent; T-bill rate on 10-year government debt is at 5.8 per cent; and unemployment is at over 10 per cent.

Then there is Angela Merkel, a chancellor whose parsimony a Konrad Adenauer or Ludwig Erhard would have been proud of. Merkel steadfastly believes that no profligate euro zone members — coincidentally, all in southern and Mediterranean Europe — should get any more bailout at the expense of hard working German taxpayers unless they wear sack-cloth and ashes and flagellate themselves, eat unleavened bread with ash, drink stale water and  say “Hail Mary” from here to kingdom come. This is silly economics at its most medieval, worthy of Gothic caricature in Asterix comic books.

Now the US and election year. Notwithstanding President Obama’s Supreme Court victory on health insurance, it is true that between now and January 2013, there will be no reforms worth the name. Though the US is better off than the euro zone, its economy remains in doldrums. The best case estimate for 2012 GDP growth is 2.3 per cent. Unemployment in election year is ruling at 8.2 per cent — lower than double-digits but bad enough to bedevil Obama. Budget deficit is at 7.6 per cent of GDP. This can only be brought to balance by 2020 through huge increases in tax or cuts in government expenditure.

What about China? GDP growth is expected at 8.2 per cent for 2012. But don’t be surprised if it posts 7.8 per cent — its lowest in many, many years. Despite over $3.5 trillion of foreign currency reserves, China is deeply concerned about how it can re-calibrate the economy towards less excess investment, lower export growth and greater domestic consumption without opening the floodgates of disaffection. This is China’s most fundamental political-economy experiment. Knowing China, it may well be executed; but it won’t be easy.

On to India, where we have done everything possible to shoot ourselves in the foot, not once but time and time again. We have had to suffer from zero economic and political governance; excess fiscal deficits, whose combined might now runs at over 9 per cent of GDP; a current account deficit well over 4 per cent of GDP — more like 4.5 per cent, but who’s counting; and leaders who are at best disconnected, and at worst look like gophers at headlights, not knowing where to go. No wonder I’m a ‘scaredy cat’. So should you be. Pray. But remain scared.

The author is chairman of CERG Advisory.

 

Start a business...

Start Up Small Business Articles

We created these start up small business articles because it is essential for you to understand all the aspects that need to be looked into while you start a new business. This is critical in order to get the business up and running quickly and functioning smoothly thereafter. You've got dreams in your eyes and a thousand things on your mind. Business planning, customer..


Select a structure - You must evaluate the pros and cons of different types of start up business structures before deciding what’s best for you. Since you are planning to start up small business, the most likely choice is between a sole proprietorship and a partnership deal. While these are the easiest to get off the ground, there is a higher element of personal liability.
Incorporate your company - Your start up small business becomes an official entity through the process of incorporation. You may need to decide where you want to incorporate because different states have different laws that may be beneficial or unfavorable. Incidentally, Delaware, Nevada and Florida are three of the most popular states in the United States for their simple laws and low start up costs. These days, incorporation is a relatively simple process and can even be done online. Also, there are a number of specialists who can help you with this.
Open a bank account - Once the official entity is created, open a bank account exclusively for your business. This helps you to separate business and personal finances and facilitates the audit of business accounts.
Finalize accountant services - You will need to maintain detailed accounts throughout the course of your business. While a bookkeeper can help with routine accounting needs, it is advised to use the services of a qualified Certified Public Accountant (CPA) for financial advice and tax planning. Always ensure that you have a grip on the financial health of your business – a regular review of accounts statements is a sound practice. Software programs such as QuickBooks can help ease the process of maintaining accounts.
Get a legal and tax advisor - Business taxation laws are very complex. While starting a small business, you will need to understand the impact of various tax systems on your company. Hire a CPA to help you find the way through such laws. This is of utmost importance as you are obligated to fulfill tax responsibilities. In addition, you will certainly have some legal considerations like copyrights, contracts and agreements. While doing your small business start up, guide yourself through all legal matters with the help of a good legal firm.

Business related all articals.............

Human Resources Articles

Dealing with your employees is an art in itself. Your younger workers want to make a quick impact, they seem to be more up to date, more prompt and more energetic; while the older employees may be more trustworthy, more dedicated and seldom violate rules. Now, if you are a smart entrepreneur, you might find it tough to come up with workplace policies that suit all your employees. Very often, your views on various business issues may differ; at some point of time you might feel that there is a skill shortage in your workforce; or some might try to assert their “supremacy” if they have specialized skills. Although this might seem petty workplace issues, they could seriously impact your team's effectiveness and thus impact your profits. Here are some simple ways that can help youbridge the gap between yourself and your employees. Of course, our human resources articles below will give you many ideas, but here are some basic concepts you should understan



 1. Don’t hide your weaknesses:
Experienced employees can often point out your mistakes, especially if they have more experience in a certain area. In that case, don’t get defensive. If you do so, it will highlight your weakness and show you up as immature. Remember, there is plenty to learn from your people, even if you are their boss!
2. Be a listener: Just because the business is yours, you don’t always need to act as if you know everything. This kind of attitude will not engender your peoples' respect towards you. Value the experience of those who are known to be efficient. A good listener of good, valuable advice always wins. You can also teach your young employees not to hesitate to take their seniors’ help.
3. Create a perfect team: Your first and foremost job is to form a team whose mission is to achieve a common goal. Each and every team player should know that he or she can reach the target only when working together, regardless of skill set or age. Further, being the team leader, treat all equally and encourage everyone to ask for help from each other or you when needed.
4. Provide them with training: To avoid skill shortages, you need to provide your workers with training. The business environment is constantly changing and your people need to be well trained to keep up. Training also keeps them motivated. One of the key workplace benefits that employees look out for is to 'learn new skills on the job'.
5. Be flexible: Some employees have family commitments that prevent them from working from exactly 9am to 5pm. In that case, consider options like flextime, part-time work, seasonal or contractual arrangements. You can also allow them to work from home. All of these will go a long way in helping you retain your valuable workforce.
Effective utilization of the expertise and knowledge of your workers can be of great advantage to any company.