[msk016]

Surprisingly the entire narrative of economics seems to be centered around the IT/Corporate world and the so called organised sector. To be honest, I work with a MNC and have nothing against the corporate world.
Out of the national GDP, 14 to 15 percent comes from the organised sector, 15 percent from agricultural sector, roughly 15% from the government. The remainder 50% or more comes from the so called unorganized sector. It is a great misfortune that we call half of our GDP creators as unorganized. We do so because the west would call it like that. To further worsen the situation, only 5% of the non corporate sector has access to funds from official sources. The rest is funded by moneylenders, families, relatives, etc. As far as the economic theories of the day are concerned, Paul Krugman (2008 economics Nobel prize winner) said, most of the economic theories of the last 30 years are useless at best or harmful at worst!! Economics used to be a subject of sociology, where classical economists would analyse how people earn, spend and save their money. This subject has now been turned on its head by model builders who have turned it in to a subject of mathematics. To understand how financilisation has taken over, please Google the LTCM debacle where Nobel prize winning economic theory (Blacks & Shoals model) was put in to action in the market and eventually the nobel prize winners lost the prize money and had to go back to teaching. This was the time when Derevatives were born. In the peak of the 2008 crisis, according to Bank of International Settlements, the total outstanding derivatives amounted to 135 trillion!! The global GDP itself was around 60 trillion! The jobless growth that we have witnessed since 2004 is primarily due to asset price inflation. This was driven by real estate, stocks and gold. Unaccounted cash was the main driver for this growth.

[apachelongbow]

Recession and job loss is truly a nightmare for the so called 'mid level manager' in any typical indian software company. On a personal front I feel for the cold cut clinical firings carried out by the now heartless HR, I am sure there are more humane ways of removing a 30/40 year old bread earner without so much as a sorry, however mostly it seems to be a result of years of neglect on the employees part, some of who I know personally. One example is of a gentleman who was until recently employeed as a senior pm in our IT bellweather company. This gentleman had last coded about 10 years back, as of now only knew pm tools and excel sheets, who is always unavailable for meetings between 10am till 4pm (because he day trades on stock markets). His vision of growth was to make more money each month, purchase more land in his village and add a storey to his villa in Buvaneswar. He was not interested in learning new skills, definitely not involved in coding, knew to speak some management jargon, and basically had time for a regular 230pm run home from work every friday afternoon.
This may be an extreme example, however there are various employees such as him, who in varying degrees just milked their companies. Now that they are getting thrown out, the wailing starts

[V.Narayan]

I would love to hear what TBHP members from the brick and mortar world have to say about their current experience. Ours has been that the economic slow down in the Indian economy is very real. The extra burden on working capital imposed by GST has made the situation worse for local production and sales. Now we need equity to fund indirect taxes because the banks don't support SMEs (like mine) adequately. Our domestic only division has tanked. Fortunately the export and production abroad pieces continue to keep the head above water. I am not against GST or the Govt collecting the taxes it needs but there is an inadequate understanding amongst our bureaucrats that the so called unorganized sector is the real sector and Govt policies need to be designed to help it grow and not throttle it which is what seems to be the unintended consequence. The newspapers focus only on IT and e-Commerce and PE Funds but the bulk of the economic job creation is funded by risk takers funneling their own capital one rupee at a time. The tone and intentions of the political class of the present Govt seems to be right. I don't know to what degree the bureaucrats are willing to change and adapt.

[BackInTheFold]

Originally Posted by V.Narayan

I would love to hear what TBHP members from the brick and mortar world have to say about their current experience. Ours has been that the economic slow down in the Indian economy is very real. The extra burden on working capital imposed by GST has made the situation worse for local production and sales. Now we need equity to fund indirect taxes because the banks don't support SMEs (like mine) adequately. Our domestic only division has tanked. Fortunately the export and production abroad pieces continue to keep the head above water. I am not against GST or the Govt collecting the taxes it needs but there is an inadequate understanding amongst our bureaucrats that the so called unorganized sector is the real sector and Govt policies need to be designed to help it grow and not throttle it which is what seems to be the unintended consequence. The newspapers focus only on IT and e-Commerce and PE Funds but the bulk of the economic job creation is funded by risk takers funneling their own capital one rupee at a time. The tone and intentions of the political class of the present Govt seems to be right. I don't know to what degree the bureaucrats are willing to change and adapt.

A balanced response to your concerns could be as follows:
- The effect of implementation of GST should be gauged in the long run. A shock such as this, while likely diminishing growth in the short term, would aid growth in the long term by making us truly a single market.
- The catch is that for it to be truly effective, it has to be well thought out and implemented

What is well thought out in the current roll-out:
- Differentiated slabs that don't push up inflation
- Retaining federal structure by ensuring states have significant sources of finance

What is not:
- The current system of determination of categories, charge back etc. are ill-advised. I recently saw an invoice that charged pickles, samosas and sweets at different rates. I can't believe the bureaucratic tangle that we've woven to determine slabs!
- Naively rolling out rules without considering impact (e.g. those that lead to working capital requirement spikes for exporters)
- Tinkering with them frequently leading to loss in predictability and consistency
- The timing, considering the weak investment and lending cycle

In this case, to abuse a Twainism, I have to believe that bureaucracy has dragged policy makers down to their level and beat them with experience. (I believe that the original Mark Twain quote was "Never argue with stupid people. They drag you down to their level and beat you with experience")

On balance, I'm inclined to wait and watch. All things being equal, the single biggest measure that I'm counting on is cleaning up the books of banks. That is simply the fundamental cure for many of the ills that plague us. The root cause of this is not the government as much as it is corrupt officials who signed off on such loans. However, cleaning the mess requires political will and execution chops that neither any government or our bureaucracy has exhibited to date.

Also, to be pedantic, slow growth does not equal to a recession

[VKumar]

Just to add to the voes:

http://www.businesstoday.in/sectors/...ry/261692.html

5000+ on roll employees and probably 4 to 5 times are the ones who were dependent on the company in form of third party workers for their bread.

[V.Narayan]

Originally Posted by BackInTheFold

A balanced response to your concerns could be as follows:

What is well thought out in the current roll-out:

What is not:

In this case, to abuse a Twainism, I have to believe that bureaucracy has dragged policy makers down to their level and beat them with experience.

Such a pleasure to read a well thought through post. GST is the right strategic move. I have been reading about it in the papers at least since 1992

All things being equal, the single biggest measure that I'm counting on is cleaning up the books of banks. That is simply the fundamental cure for many of the ills that plague us. Also, to be pedantic, slow growth does not equal to a recession

Yup. Cannot agree more. I tell my wife that in my next janam I want to be a e-commerce guy who gets a valuation proportional to losses

[sgiitk]

What is very interesting is that Recession is biting far more in enterprise with a very high No.2 content. So the people are still to come to terms with paying their taxes. By and large it is lower in enterprise with a low black money involvement.

[Samurai]

This article explains how India is moving towards a demographic disaster.

https://scroll.in/article/854211/the...d-but-disaster

[hothatchaway]

Originally Posted by Samurai

This article explains how India is moving towards a demographic disaster.

https://scroll.in/article/854211/the...d-but-disaster

I am no tax expert, nor do I support any political regime, but I found the article to be heavily slanted against the recent reforms in addition to taking very obvious pot shots against the current regime. If one were to read this in isolation, it would seem that our economy will fold in the next couple of years.

However, creation of 'quality' jobs is indeed a concern, and that is more due to the mediocrity of Indian companies - across sectors - than the action/inaction of any regime. Enough has been talked about IT so will not go there. But even in manufacturing we are either uncompetitive at the lower end of the scale or unable to come up with products which can put Indian companies on the global map. So if you cannot increase your topline, boosting bottomlines - cutting jobs being one the measures - becomes inevitable.

[Engine_Roars]

Originally Posted by Samurai

This article explains how India is moving towards a demographic disaster.

https://scroll.in/article/854211/the...d-but-disaster

This portal is known to be anti current government, in today's day and time, it is very important to filter out the information based on facts. Way too many people who earn out of selling anything that can go viral.

[Samurai]

Originally Posted by hothatchaway

I am no tax expert, nor do I support any political regime, but I found the article to be heavily slanted against the recent reforms in addition to taking very obvious pot shots against the current regime. If one were to read this in isolation, it would seem that our economy will fold in the next couple of years.

Originally Posted by Engine_Roars

This portal is known to be anti current government, in today's day and time, it is very important to filter out the information based on facts. Way too many people who earn out of selling anything that can go viral.

I went by the content rather than the bias of the portal. As an entrepreneur I am acutely aware of the effect of government policy on businesses. Government policy can kill/save businesses at the stroke of a pen. People who are not from business background don't usually realize this.

Let me give some examples:
1) Lot of businesses in India depend on cheap labour. If the labour cost goes up, most of them just have to fold. Government can make this happen simply by raising minimum wage beyond the threshold point. For example, last year April Karnataka government gave 54% hike in minimum wage for security guards. As a result many customers reduced their security requirements. And many security guards lost jobs.

2) Lots of small businesses run on a cash only model to avoid taxes. They never paid taxes, and managed this by bribing the local tax officials instead. These guys were hit hard due to GST which forces the entire supply chain into the tax bracket. Many of these businesses never factored sales tax or income tax into their revenue model. They are going bankrupt now that they have to pay tax.

3) GST has also affected the working capital requirements. I think the article explains it.

4) Recent liquor ban yet another clear example. When SC banned all liquor vends within 500m of all NH/SH, it plunged an entire industry into utter chaos. This was because the SC didn't clarify whether it applies to city limits. The central government didn't lift a finger to provide any relief to the industry despite a million job getting lost. Many state governments came to the rescue, but they didn't have enough power. Eventually, the persistent legal activism by industry representatives forced the SC to clarify that the ban doesn't apply to city limits. Due to this few months of uncertainly, thousands of businesses were bankrupted or incurred huge losses and fired their staff.

[V.Narayan]

This thread's title should be 'Issues of the Economy' instead of 'Recession Again'. The latter title narrows down the discussion to a trend or a point in time.

I am a supporter of the current Govt and in the past was a supporter of PV Narashimha Rao too. So my views may be coloured. What I experience first hand is that the venal corruption in the Govt at the ministerial level and the Secretary/Additional Secretary level has completely disappeared after 2014 as compared to years before. I am talking of the Central Govt. not of State Governments. This in itself is creditable. If members disagree please do so on basis of your own experience and not journalist writings. The attitudes of the senior most layers of bureaucracy is very encouraging and mature at least in the two ministries I have to deal with. A very healthy break from the past. I do not see this translated yet in any change in attitude of the worthies at the middle rung - Joint Secy and below.

Second this Government's agenda on GST, de-monetization etc has been implemented in a way that has and is causing small businesses to fold up very rapidly. In its bid to ratchet up the tax collection base the Govt has made it impossible for the small entrepreneur-employer to survive. The holier than thou amongst us can say ' if they don't pay taxes let them go bust' but bear in mind the administration of our nation allowed a certain economic-tax-cash environment to come up over 70 years. There are a thousand unspoken rules and assumptions entrepreneurs invest under (and create jobs) and all of a sudden in one teutonic move those paradigms have changed. This damage to the employment will I believe come back to trouble us in growth numbers for the next 8 quarters or more. On top of that a bad tax administration has become worse. A buoyant stock market does not equal to employment generation or factory creation.

Third unless they can undo at least a part of the inspector raj which brick & mortar guys like me deal with I do not see investment in real assets that produce goods and services and create jobs. It is easier today to invest in the stock market and earn a decent return than to go through the toil and (in India) harassment of the petty government official.

Originally Posted by Samurai

I went by the content rather than the bias of the portal. As an entrepreneur I am acutely aware of the effect of government policy on businesses. Government policy can kill/save businesses at the stroke of a pen. People who are not from business background don't usually realize this.

Thank you Samurai. Well said. Fully agree. People in employment, even senior executives of big companies, do not understand how marginal in terms of cash is the existence of an entrepreneur.

[DigitalOne]

Originally Posted by Samurai

Let me give some examples:
1) Lot of businesses in India depend on cheap labour. If the labour cost goes up, most of them just have to fold. Government can make this happen simply by raising minimum wage beyond the threshold point. For example, last year April Karnataka government gave 54% hike in minimum wage for security guards. As a result many customers reduced their security requirements. And many security guards lost jobs.

2) Lots of small businesses run on a cash only model to avoid taxes. They never paid taxes, and managed this by bribing the local tax officials instead. These guys were hit hard due to GST which forces the entire supply chain into the tax bracket. Many of these businesses never factored sales tax or income tax into their revenue model. They are going bankrupt now that they have to pay tax.

3) GST has also affected the working capital requirements. I think the article explains it.

4) Recent liquor ban yet another clear example..... Due to this few months of uncertainly, thousands of businesses were bankrupted or incurred huge losses and fired their staff.

Good examples, especially the first one. Always the 'well-intentioned Socialists' argue for and enhance the minimum wages leading to job losses and unemployment. Their only motivation is to make everybody equally poor. Disturbingly, this is now being planned for domestic help also:

https://qz.com/1103913/abused-for-ye...t-legal-cover/

Lots of domestic help will be out of jobs if minimum wages are implemented. Washing machines and dishwashers would suddenly feel cheaper and hassle free. There won't be a babu knocking at your door to check how much you are paying your domestic help.

Hope better sense prevails.

----

On the general economy there are two parallel threads running. One is the doom and gloom thread (perpetuated by the likes of Scroll.in and The Wire).

The other is that the foundation of a great economy is being laid (Digital India, Improved Infrastructure, and GST) and we will have a boom in a couple of years. The stock markets, and the more serious investors seem to believe this narrative.

What you believe is on which side of the fence you are in.

Meanwhile, Hero Motocorp sells 3 lakh motorcycles in a day:
https://economictimes.indiatimes.com...w/61151689.cms

[V.Narayan]

Originally Posted by DigitalOne

On the general economy there are two parallel threads running. One is the doom and gloom thread (perpetuated by the likes of Scroll.in and The Wire).

The other is that the foundation of a great economy is being laid (Digital India, Improved Infrastructure, and GST) and we will have a boom in a couple of years. The stock markets, and the more serious investors seem to believe this narrative.

What you believe is on which side of the fence you are in.

Meanwhile, Hero Motocorp sells 3 lakh motorcycles in a day:
https://economictimes.indiatimes.com...w/61151689.cms

Very well said. +1 to that. Despite having to live with realities on the ground I am in the 'foundation of a great economy is being laid' bucket. After having seen, in my working life, first hand, the 1980s, the 1990s and the last decade I am more hopeful for our country today then ever before because I am seeing green shoots in the most venal and decadent sector of our economy-society - the Government. I am sure many will disagree. I am but sharing my own direct experiences.

[mayankk]

There is a lot of talk of some sort of a sudden clean government system. You are all mistaken. It is still as prevalent as before. The only difference is that there is more of "in kind" going on, rather than overt stuff. If you've dealt with the babudom for business, rather than chit chat, you'll know what I'm talking about.
Please don't be under any kind of impression that all of a sudden a career officer who works for 30 plus years has changed colors. Those who weren't corrupt before, aren't still. Those who were, are.
And yes, this is from personal experience, one on one.