Shyam's Slide Share Presentations


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Saturday, December 31, 2016

Why demonetisation is greatest blunder by a govt in 69 years of free India Prem Sankar Jha 01-01

December 30, the deadline Prime Minister Modi set for completing his exercise in demonetisation has come and gone, and there is now no room to doubt that it was the single greatest blunder that any government has made in the 69 years that India has been free. On November 8, Mr Modi demonetised 20 billion bank notes, accounting for 86 per cent of the cash in circulation in the Indian economy. But only a fraction of the new currency notes needed to replace them had been printed. As if this was not inept enough ‘somebody’, that is to say everybody from the prime minister to the head of the Reserve Bank, ‘forgot’ that if the new notes were of a different size from the old, the ATMs would not work.  The result was that, like a car engine run without lubricating oil, the economy simply seized up.

The impact on the economy has not only been catastrophic but highly unequal. Those with bank accounts and credit cards were merely inconvenienced. Those who earn and spend mostly, or entirely in cash, found themselves rendered penniless overnight. These were the poor of India. Banks still account for only a little over 30 percent of total credit extended in the country. The balance comes from moneylenders who deal in cash. That credit collapsed.   In terms of value the proportion of transactions that has been digitized is also about the same. But this figure is deceptive because in numbers around 90 percent of transactions still take place in cash. This entire segment – the lion’s share—of the economy is now paralysed.

The fewer are the transactions in the economy, the lower is the income they generate. There is now a consensus among economists and bankers, therefore, that the GDP will shrink in the second half of this fiscal year. Shortly after the Goldman Sachs slashed its growth estimate for the second half of the year by 1.6 percent and predicted that the GDP would grow by 6.8 percent. This was 0.8 per cent below its original estimate.  Deutsche bank similarly estimated that the annual growth would be around 6.5 percent. But the most pessimistic estimate was that of Ambit Capital which forecast that the economy would actually shrink in the remainder of the year, and bring the annual growth rate down to only 3.5 percent for the year.

Anecdotal evidence suggests that Ambit’s estimate is likely to prove closest to the mark. 90 percent of India’s more than 300 million non-agricultural unorganized labour is paid daily or weekly in cash. To pay them their employers have to have that cash first. The government’s severe weekly withdrawal limits have made it virtually impossible to pay these workers in the new legal tender. So far employers were paying them in old notes and asking them to convert these into the new money. But this loophole has been shrinking and will shut on December 30.

As a result, Mazdoor Nakas—casual labour markets-- where many of these workers congregate every morning in the search for work, now receive a trickle of hopeful aspirants, as the news has spread that their employers, mostly in the construction, do not have the cash with which to pay them. There is a swelling reverse stream of migrant workers returning to their home villages, where the cash they have managed to save before the calamity will last longer than in the city. Sectoral information from organized industry for the month of November was bleak: a 20 percent fall in auto sales, 35 to 40 per cent in two wheelers, 63 per cent in tractors.

But the most severe crunch has taken place in the rural areas, where nearly all transactions are in cash and there are far fewer banks. The occurred just as farmers in north India in particular were selling their Kharif crop and making their purchases for the Rabi. There is some preliminary which suggest that the area sown with Rabi crops has therefore shrunk but the full impact upon the Rabi will only be known as the crop ripens. What is certain is that farmers all over India have minimized their purchases of non-essential goods. This will killthe fillip that the bumper Kharif harvest would have given to the consumer goods industries.

Mr Modi has sought to reassure the people that this is only a short term, and necessary pain that the people have to suffer, to cleanse the black money of corruption and black money. Once it is over the economy will not only revive, but emerge stronger than ever.  This is wishful thinking. For the sharp cut in spending that has taken place will last for the entire time, now estimated at up to six months more, that it will take for all the old notes to be replaced. During all this time spending will remain constrained so income growth will fall too. This means that the decline in consumer spending will persist.

This will force manufacturers to cut production in order to clear their unsold stocks. That will cause a second round of reduction of orders and retrenchment of employees, so another contraction in income and expenditure.  The economy will therefore continue to glide downwards till it bottoms out. Left on its own the economy is likely to take another two years to recover. By hen 2019 will have come and gone, and so will the Modi government.

If Mr Modi wishes to revive the economy quickly enough to recoup his party’s political fortunes, he will have to give it a huge jolt, not unlike the electric shock given to patients suffering a cardiac arrest. The only way in which he can do that is through a huge cut in interest rates. By this I do not mean a cut of 50 or even 100 basis points in policy rates. I mean a slew of changes in various policy rates that will bring the lending rates of the commercial banks lend to investors of five to seven percent below the banks down to at most five per cent; that is six to seven percent below that rates that had prevailed before demonetisation.

A cut of this magnitude will enable India’s dying infrastructure and real estate companies to refinance their debt and thereby halve their interest costs. This alone will enable a large proportion of these companies to pull out of the red and take up many of the Rs 8,80,000 crore worth of ‘stalled’ projects that they abandoned when interest rates began to rise, and industrial growth to sink, six years ago.

A halving of bank lending rates will also revive the real estate sector as millions of home buyers will once more be able to meet their monthly installment payments, and  give a huge fillip to the sale of consumer durables that account for more than a quarter of manufacturing output.

But how will Mr Modi bring interest rates down so sharply now , when neither he nor his predecessor were able to persuade the RBI to do so earlier, and when he has formally  ceded the entire power to set them to the RBI and its newly created monetary policy committee? The latter contains economists who, one presumes , are more sensitive to economic growth issues than the bankers of the RBI, but even they will be bound by the now official diktat of ‘inflation targeting’.

Inflation targeting requires central banks to keep lending rates in the economy above the rate of inflation at all times. Its purpose is not economic growth but financial stability, because doing so reassures all Indian, and particularly foreign, holders of Indian money that the government will not allow the value of their savings and investment to depreciate. Advocates of inflation targeting claim that growth will automatically pick up when prices and exchange rates stabilize, but they are unable to describe the chain of cause and effect that will make this happen. There is also very little evidence in the experience of other countries that had adopted inflation targeting, to buttress this claim. On the contrary, South Korea’s two-decade long surge to prosperity took place in the midst of a 21percent annual rate of inflation and a continuous devaluation of the won to counteract its impact upon external competitiveness.

In India inflation targeting, which has been the informal mantra of the RBI since 2006, has bestowed the kiss of death on industry, infrastructure, construction, and therefore  employment. This is because it does not distinguish between inflation caused by an excess of demand in the economy, which high rates can bring down, and one cause by shortages of supply, whether of food grains, industrial  raw materials ( usually a  reflection of rising global commodity prices) , or labour which, by curbing production, they can only intensify.

India’s cost of living index is sticky, and has diverged further and further from the wholesale price index of inflation that the government used earlier, because ever since 2007, its CPI inflation has reflected local and global shortages, and not the state of domestic demand. Judged by the latter, which is reflected both by the wholesale price index and the GDP deflator, the true rate of demand inflation in the country was zero or negative even before Mr Modi exploded his demonetisation bombshell.

In India inflation targeting will play a useful role if it keeps interest rates two to three percent above the rate of demand inflation. By that yardstick today even a five percent long term rate of interest would be on the high side. So bringing commercial bank lending rates down to this level is the minimum that Mr Modi should do.

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Monday, December 26, 2016

Modi’s Cash Ban May Have Been in Vain as India Outlook Dims Bloomberg 12-27

Prime Minister Narendra Modi needs a new narrative for his banknote ban.
He’d touted the surprise move to scrap high-value bills as India’s biggest step against unaccounted cash, which the government estimated at 5 trillion rupees ($74 billion). The bulk of this money has already been deposited with two more weeks to go before the deadline lapses, meaning the shock to the system may have been in vain.

The decision sucked out 86 percent of currency in circulation, akin to withdrawing all U.S. dollar bills except about half of the $1 notes. Only 50 percent of this is projected to be replaced by the year-end, leaving authorities scrambling to push digital payments as public anger rises.

"India’s ‘own goal’ currency swap initiative has put a crimp on the cash-dependent economy," said Singapore-based Paul Gruenwald, chief economist for Asia-Pacific at S&P Global. The government’s "well-intentioned but poorly thought through demonetization program" is driving down the pace of economic activity, he said.

Finance Minister Arun Jaitley on Friday said there’s no official estimation of black money, the local term for unaccounted wealth. He submitted a written reply to a lawmaker’s question about a month after the government’s lawyer told the Supreme Court that Indians won’t deposit about 4 trillion rupees to 5 trillion rupees of bank notes of the 15.4 trillion rupees invalidated by Modi’s move, implying that this was ‘black.’ The top court was hearing petitions questioning the rationale behind Modi’s decision after Modi in his Nov. 8 speech to the nation said "the specter of corruption and black money has grown," without providing figures.

So far, about 13 trillion rupees of bills have been deposited in banks. The central bank on Monday tightened deposit rules, adding to a list of regulatory flip flops since Nov. 8.


As investors try to assess the impact of Modi’s move, all eyes will be on the government’s forecast for the year through March -- due Jan. 7. The central bank and private economists have lowered their projections for the economy where 98 percent of consumer payments are made in cash.


The Nikkei purchasing managers’ index signals a contraction in the key services sector, which accounts for about 60 percent of gross domestic product. Car purchases, a main indicator of manufacturing demand, grew at the slowest pace in nine months in November while sales of motorcycles and scooters -- where about 65 percent of payments are in cash -- fell for the first time in almost a year.


Commercial credit sank to a 19-year low as backlogs piled up at factories and banks stayed busy with the task of exchanging currency notes. Meanwhile deposits surged, pushing the credit-deposit ratio to a six-year low.

"For a cash dependent economy, a cash crunch is not good," said Madhavi Arora, Mumbai-based economist at Kotak Mahindra Bank Ltd.


The trade deficit widened to a 16-month high as export growth slowed in November and imports surged. Most worryingly, gold shipments jumped 26 percent in November, triggering speculation that consumers were converting their cash into non-productive holdings of the precious metal.


Export numbers also hinted at the employment outlook. A decline in gems and jewelry, a sector that depends on unorganized manual labor, suggested the cash crunch was affecting employment, said Kapil Gupta, an analyst at Edelweiss Securities Ltd. Rafeeque Ahmed, chairman of the council for leather exports, said Modi’s move has slashed about 75,000-100,000 jobs from his industry. 


As demand dips for goods, price pressures are easing. The benchmark consumer inflation gauge plunged more than estimated to below the mid-point of the central bank’s target. However, this wouldn’t be the first time that economists have been surprised and it may not open much room to ease policy. So-called core inflation -- excluding food and fuel -- is sticky, the central bank said this month. 


India’s currency clampdown won’t impact the nation’s credit ratings, according to S&P Global Ratings. However, the company said Indian corporates and banks will face short-term "execution and adjustment risks."

Fitch Ratings called the demonetization a "one-off event" and said that while the short term hit will be significant, people will find "inventive ways" around the cash crunch. Moody’s Investors Service placed on negative watch three micro-finance lenders, indicating that their ratings may be downgraded.


Data on card transactions indicate plastic is taking the place of currency usage at a faster pace. With the data incomplete, conclusions are tentative, but the analysis strengthens Bloomberg Intelligence Economics’ view that demonetization will not deal a major blow to growth.


A central bank survey of 4,686 respondents also pointed to robust consumer sentiment despite the cash ban. Perceptions of general economic conditions and financial situations have improved, the central bank said Dec. 7, adding that the surveys were conducted between Oct. 27 and Nov. 13 and more data must be analyzed to draw conclusions.

"A puzzle has arisen of late -- why are some activity indicators still in the positive range, albeit slowing, when cash has contracted so sharply?" said Pranjul Bhandari, chief India economist at HSBC Holdings Plc. "One answer might be that growth will be affected with only a lag. Another is that informal arrangements, like vendor credit, have helped to fill the void." 

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Sunday, December 25, 2016

SRK to be conferred honorary doctorate by Hyderabad-based varsity 12-26

Hyderabad: Bollywood superstar Shah Rukh Khan is slated to be conferred with honorary doctorate by the city-based Maulana Azad National Urdu University tomorrow.  

President Pranab Mukherjee would be the chief guest at the sixth convocation of the university where nearly 48,000 students will be awarded degrees.

Telangana and Andhra Pradesh Governor ESL Narasimhan would be the guest of honour at the event to be presided over by the varsity’s Chancellor, Zafar Younus Sareshwala.

Telangana Deputy Chief Minister Mohammad Mahmood Ali will be the other guest of honour. 

Along with Shah Rukh Khan, Urdu aficionado and founder of Rekhta Foundation Rajiv Saraf would be given ‘honorius causa’ for their contribution in the promotion of Urdu language and culture, a release from the varsity said.

The university was established here in 1998.

About 2,885 graduates and postgraduates and 276 M.Phil and PhD scholars from various disciplines in regular courses will be awarded the degrees. Besides, 44,235 graduates and post graduates under the distance mode of learning would also be given degrees in absentia, the release added.

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What India Has Done To Its Money Is Sickening And Immoral-- Steeve Frobes 12-25

Image credit : Shyam's Imagination Library

IN NOVEMBER India's government perpetrated an unprecedented act that is not only damaging its economy and threatening destitution to countless millions of its already poor citizens but also breathtaking in its immorality. Without any warning India abruptly scrapped 85% of its currency. That's right: Most of the country's cash ceased to be legal tender. Shocked citizens were given only a few weeks' notice to take their cash and turn it in at a bank for new bills.

The economic turmoil has been compounded by the fact that the government didn't print a sufficient amount of the new bills, lest word leak out as to what was about to take place. The new bills are also a different size than the old ones, creating a huge problem with ATMs. Even though India is a high-tech powerhouse, hundreds of millions of its people live in dire poverty. Many workers are leaving the cities to go back to their villages because so many businesses are closing. Countless companies are having difficulty meeting payroll, as they can't get the cash to do so. The real estate market has tanked.

India's economy is based mostly on cash. Moreover, much of it operates informally because of excessive rules and taxes. The government bureaucracy is notorious for its red tape, lethargy and corruption, forcing people to get by on their wits.

The World Bank's annual survey, Doing Business, measures how difficult it is to start and manage a business in 190 countries, using such metrics as what it takes to set up a legal business, obtain construction permits and get electricity. India ranks among the worst in the world in these areas.
Not since India's short-lived forced-sterilization program in the 1970s--this bout of Nazi-like eugenics was instituted to deal with the country's "overpopulation"--has the government engaged in something so immoral. It claims the move will fight corruption and tax evasion by allegedly flushing out illegal cash, crippling criminal enterprises and terrorists and force-marching India into a digitized credit system.

By stealing property, further impoverishing the least fortunate among its population and undermining social trust, thereby poisoning politics and hurting future investment, India has immorally and unnecessarily harmed its people, while setting a dreadful example for the rest of the world.

What India must do to fulfill its desire to become a global powerhouse is clear: slash income and business tax rates and simplify the whole tax structure; make the rupee as powerful as the Swiss franc; hack away at regulations, so that setting up a business can be done with no cost and in only a few minutes; and take a supersize buzz saw to all the rules that make each infrastructure project a 100-year undertaking.

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Tuesday, December 13, 2016

Demonetisation, Not a tragedy, A Remedy S. Gurumurthy 12-14

Narendra Modi is correcting the monumental mismanagement of the economy by the economist Dr. Manmohan Singh

In his article (“Making of a mammoth tragedy”, The Hindu, December 9), Dr. Manmohan Singh attacked the demonetisation of high denomination notes (HDNs) by the National Democratic Alliance (NDA) government as the “making of a mammoth tragedy”. In his prose, Dr. Singh speaks less as an economist in which capacity he is respected more than as the former Prime Minister, the role which has actually dented his image. Yet it is best to respond to him on economic issues which he has kept away from, not to his political verses. Undisputed facts, not alluring rhetoric, should decide whether demonetisation is a tragedy or a remedy. Is it a monumental mismanagement of the economy as Dr. Singh charges? Or is it a remedy for the accumulated filth as Prime Minister Narendra Modi claims? To know the answer, the story of the Indian economy from 1999 to 2004 under the NDA and from 2004 to 2014 under the United Progressive Alliance (UPA) needs to be recalled.

Real versus statistic

During the NDA rule (1999-2004), real GDP grew by 27.8 per cent, annually 5.5 percentage points. Annual money supply, that fuels inflation, by 15.3 per cent. Prices by 23 per cent, annually 4.6 per cent. Asset prices rose only moderately in those five years. Stocks rose by 32 per cent; gold by 38 per cent. Taking Chennai as an illustration, land prices by 32 per cent. Jobs rose phenomenally, by almost 60 million. The NDA also turned in a surplus of $20 billion in 2002-04 in the external sector, after decades of unending deficits, save in two years in the late 1970s.

Now come to the UPA rule under Dr. Singh, the economist Prime Minister. In the first and best six years of the UPA (2004-05 to 2009-10), before it was hit by scams, real GDP grew by 50.8 per cent, annually 8.4 percentage points — one-and-a-half times NDA’s. The world celebrated Dr. Singh. The UPA was intoxicated by the “high growth” story. But how many jobs did UPA’s high growth produce? Believe it or not, just 27 lakhs against 600 lakhs during NDA’s five years, according to NSSO data. UPA achieved one-and-a-half times NDA’s GDP growth, but just 5 per cent of its job growth. Dr. Singh now bemoans that Mr. Modi’s demonetisation will stifle jobs!

Move on. In the six years, prices rose by 6.5 per cent (4.6 per cent under NDA). The external sector deficit was $100 billion (against NDA’s $20 billion surplus). Did high petroleum prices force it? No. Zero-rated customs duty-led capital goods imports which topped petroleum imports was the culprit.

Asset inflation

Why was the UPA’s high growth jobless? The well-kept secret is that huge asset price inflation, not production, passed off as high growth. In the first six years of the UPA, stock and gold prices jumped by three times — annually by 60 per cent. Property prices doubled every two-three years. In Gurgaon, not on the property map in 1999, land prices rose by 10-20 times. Asset inflation in six years was three times the annual nominal GDP growth. The asset inflation not the result but the cause of the UPA’s “high growth”! How? Modern economics deducts the non-asset price inflation from nominal growth to know the real growth. But it sees asset price rise as wealth and prosperity and adds it to GDP. See how this economics worked for the UPA.

Unmonitored Rs.500/1,000 notes

Economics says money, growth, prices and jobs are inter-related. Apply this rule to the NDA and UPA periods. During 2004-10, average money supply grew annually 18 per cent (15.3 per cent under the NDA). But asset prices rose by several multiples of it. The moderate rise in money supply over the NDA’s number does not explain the huge asset inflation. The clue hides in the rising unmonitored HDN cash stock with the public which made black money deals easy. In 1999, the cash with the public was 9.4 per cent of nominal GDP. By 2007-08, instead of falling due to rising bank and digital payments, it jumped to 13 per cent of nominal GDP. Later it began hovering around 12 per cent.

More critically, the HDNs with the public more than doubled from 34 per cent in 2004 to 79 per cent in 2010. On November 8, 2016, it was 87 per cent. The average annual rise in HDNs was 51 per cent between 2004 and 2010 and the annual rise was 63 per cent by 2013-14. The Reserve Bank of India noted that two-thirds of the Rs.1,000 notes and one-third of the Rs.500 notes — that is over Rs. 6 lakh crore now — never returned to banks after they were issued. The unmonitored HDNs roaming outside banks began driving up the gold and land prices by black cash and the stock prices through Participatory Notes (PNs) — which are largely hawala transfers out of India — that came back pretending as foreign investment in stocks. The PNs rose from Rs.68,000 crore in 2004 to Rs.3.81 lakh crore in 2007.

How did the asset inflation lead to the UPA’s “high growth”? Inflated asset prices to the extent realised by sale got accounted as part of income and included in GDP. Large part of the gains on stock sale got added to GDP with very little tax under Securities Transaction Tax. The spurious wealth effect also led to high-end consumption. The annual private consumption growth averaged 18 per cent till six years to 2009-10 — 80 per cent over the NDA average. The fake wealth effect, powered by HDN cash, scripted the UPA’s “high growth” story. HDNs outside banks took refuge in stocks, gold and land, produced capital gains-led growth and consumption. Had the HDNs circulated through the banking system, it would have multiplied through the fractional reserve model, reduced the inflation and interest, and funded the small-and-medium enterprises starved of organised funding.

Catch-22 situation

The curse — asset inflation inspired jobless growth — seems irreversible till unmonitored HDNs roam and fuel fake growth. Dr. Singh had had enough wake-up calls when the share of HDN cash was escalating year after year from 2004. He could have de-escalated the hugely growing cash economy had he remonetised the HDNs by lesser denominations without demonetisation — sparing the people of discomfort and economy of short-term damage. Of course, he would have lost the “high growth” brand that made UPA rule an economic success. To unmask this deception and revive job productive growth, the unmonitored HDNs needed to be brought to account forcibly. By his inaction, undeniably, Dr. Singh had landed the economy in a Catch-22 situation. The Modi government could either opt to continue the status quo of jobless growth or force temporary decline in growth to reinstate real growth and jobs. It opted for the latter. Even an undergraduate student in economics will tell you that it will cause hardship and hit growth in the short run. A Cambridge economist is not needed to write a column on that. It is already late. If the status quo of unmonitored HDNs were to last for another five-six years, the size of HDNs would have become so huge that no government may have been able to act against it — inevitably inviting a huge crisis, both internal and external. Prime Minister Modi has rightly called the demonetisation as “kadak chai” (bitter pill). That HDNs promoted high bribery and helped terror funding through fake HDNs cannot be disputed at all. Far from doing a monumental misappropriation or making a “mammoth tragedy”, Mr. Modi is correcting the monumental mismanagement of the economy by the economist Dr. Singh.

JNU professor Arun kumar on Demonetisation 12-14

S. Gurumurthy on Demonetisation 12-13

Saturday, December 10, 2016

Selling tomatoes at 25 paise/ kg! Chhattisgarh farmers destroying their own produce, thanks to demonetisation 12-10

Pathalgaon and Farsabahar in Chhattisgarh's Jashpur and Raigarh district respectively were hoping for some miracle this year! As the tomato production at both of these

With scrapping of old Rs 500 and Rs 1000 notes by PM Narendra Modi in the mid night of 8th November, the demand for vegetables went down as people couldn’t find change to buy much during initial phase. The middlemen started taking advantage of the situation. It went to such a chaos that the traders fixed the price at Rs 25-50 for 100 kilos, which drips down to 25 paise to 50 paise a kg. Not just that the hard work of a farmer is insulted but that doesn’t even compensate the transport cost of the farmer for bringing the produce to the mandi.

Raged at the injustice, the farmers have decided to crush the tomatoes on roads instead of selling them, confirms a report by ANI. Despite a legal tender to sell the produce, the farmers have destroyed the tomatoes by spreading them on road for speeding vehicles to crush them.
places rose to a never-before mark, they thought they will be having a really good year ahead. But suddenly the demonetization happened and it all changed.

Chhattisgarh administered by the BJP member Raman Singh has been demanding adequate cold storage facilities for preservation of crops. Unfortunately it’s been a decade, neither a cold storage nor food processing factories have been set up. Though this isn’t just a case of Chhattisgarh, even farmers in Maharashtra, Uttar Pradesh and West Bengal have been hard hit after demonetization as the profit margins have gone down and the farmers can’t hire labours to harvest the ripe crops.  

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Friday, December 9, 2016

Won't Allow H1B Visa Holders To Replace US Workers: Donald Trump 12-10

Image credit : Shyam's Imagination Library

WASHINGTON: President-elect Donald Trump has said he would not allow Americans to be replaced by foreign workers, in an apparent reference to cases like that of Disney World and other American companies wherein people hired on H-1B visas, including Indians, displaced US workers. 

"We will fight to protect every last American life," Mr Trump told thousands of his supporters in Iowa on Thursday as he referred to the cases of Disney world and other US companies.

"During the campaign I also spent time with American workers who were laid off and forced to train. The foreign workers brought in to replace them. We won't let this happen anymore," Mr Trump vowed amidst cheers and applause from the audience.

"Can you believe that? You get laid off and then they won't give you your severance pay unless you train the people that are replacing you. I mean, that's actually demeaning maybe more than anything else," he said.

Disney World and two outsourcing companies have been slapped with a federal lawsuit by two of its former technology staff, alleging that they conspired to displace American workers with cheaper foreign labour brought to the US on H-1B visas, mostly from India.

The two employees - Leo Perrero and Dena Moore - were among 250 Disney tech workers laid off from their jobs at Walt Disney World in Orlando in January 2015. They have also dragged two IT companies HCL Inc and Cognizent Technologies into this class action lawsuit.

"You know the name of one of the companies that's doing it. I'm going to be nice because we're trying to get that company back. Don't forget much harder when a company announced a year and a half ago - some of these companies, like Carrier, they announced long before I even knew I was going to be running for president," Mr Trump said.

On immigration, Mr Trump reiterated that he will build the wall along the Mexico border.
"We will put an end to illegal immigration and stop the drugs from pouring into our country, the drugs are pouring into our country, poisoning our youth and plenty of other people," he said.
"We will stop the drugs from pouring into our country. We will stop the drugs from poisoning our great and beautiful and loving youth. OK? We'll do it," he said, adding that the Trump administration will stop the violence that is "spilling across our border."

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Notes ban will hurt economy: former chief economist of World Bank 12-10

“Demonetisation will cause the economy to run into great difficulties in the future. Declaring the old Rs500 notes legal again might minimise the damage majorly,” said Kaushik Basu, former chief economist, World Bank. Basu was delivering a lecture at the Indian Institute of Technology-Bombay (IIT-B) on Friday as part of the N R Kamath Chair Colloquium.

Talking about ‘the economics of corruption, black money and demonetisation’, Basu examined the statement made public by the finance ministry, a day after demonetisation was announced.
“The ministry said this move will help control the printing of fake currency in our country. However, what is happening instead is that people are exchanging their notes, fake or not, for fresh new notes. This is not solving the problem,” he said. He added that the government should focus on producing better quality currency. He said that instead of helping control inflation, this move might damage the economy further.

“Even the idea of walking towards a cashless society is a long stretch for India. Currently, close to 98% transactions take place through cash. Even the US would take 10-12 years to achieve this goal,” he said.

The total value of Rs500 and Rs1,000 notes stands at Rs 15 lakh crores, said Basu. He added that only Rs12 lakh crores has been deposited in banks so far. “New notes worth only Rs4 lakh crores have been circulated in the market and the Reserve Bank of India said this figure will reach Rs6 lakh crores by the end of December. The shortfall is a lot. The government needs to take serious steps to save the economy during the next financial year,” he said.

Comparing the current situation to a similar move orchestrated by the Indian government in 1978, when it banned Rs1,000 notes, Basu highlighted how the move damaged the country’s economy in 1979-80. He said the only way to save prevent intensive damage this time around was to scale back. “The government must accept its mistake and take responsibility. It must take a step back and reverse part of the decision. People will be angry, but this will help minimise the problem,” concluded Basu.

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How to Build Trust through Ethical Selling 12-10

Ethical behaviour is key to maintaining customer loyalty. In sales, it’s often hard to shift the focus from hitting short-term revenue goals, especially when there can be a great deal of expectation within the business to achieve them. However, taking your customer perspective can save you a lot of trouble and actually make reaching your revenue goals much easier.

Rather than struggling to increase profit no matter what, it’s much more useful to learn what could be undermining success. In sales, it’s often trying too hard to increase profit as and perhaps at the expense of meeting customer needs.

Customers can smell desperation! If your revenue is the only thing in your mind, you are far more likely to start making unethical decisions, such as making exaggerated promises or even trying to persuade people to buy something that they don’t need. Although some may be gullible enough to take the bait the first time – they definitely won’t be back after they realise you’ve abused their trust.
According to Help Scout, typical business hears complaints from only 4% of their dissatisfied customers, and around 90% of them simply abandon the idea of ever buying from you again*. This leaves sales people baffled, wondering why their revenue is suddenly rapidly decreasing.
The chances that your company will sell something to a loyal customer are up to 70%, while those of selling to a new prospect are not higher than 20%*. Evidently, gaining customers’ trust is imperative for a successful business.

So, what is ethical selling?

The first thing to have in mind is that whatever you are selling needs to help your customer. Don’t try to sell your product/service to everyone, but think of that ideal customer that actually needs it.
It’s all about solving their problems. If your product has made your customer’s life easier, in any aspect, they will subconsciously start trusting your brand. They will choose you over their competition, and they will recommend your company to their friends and family. That is why they say that a loyal customer is worth up to 10 times as their first purchase.

Always be clear and never lie to your customers. They are a person, just like you, and they know the difference between an honest proposal and a desperate attempt to dig into their pockets.
Never disappoint your customers or clients. Misrepresenting your product inevitably leads to it not fulfilling their expectations, and then the game is over.

Instead of speaking badly about your competition, concentrate on building your reputation by giving your customers what they need.

Resolve all issues quickly and never ignore customer complaints. There is a great chance that by doing so you’ll not only manage to keep your customer, but they will feel like they are very important to you (as they should be) and subconsciously become attached to your brand.

If your company concentrates on customer needs, instead of your revenue goals, eventually both will be met.

No matter whom you’re selling to: clients or other companies, you should always live up to excellent ethical standards. Ethical practices in sales are crucial for successful trading, regardless of how big the value of your sales or deals is.

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How the Pursuit of Happiness Has Made Us Nervous Wrecks 12-10

Worry, anxiety and nervousness are at an all-time high in American society. The economy, terrorism, politics, work, parenting — the list of stressors is endless. But author Ruth Whippman believes there’s another reason why anxiety has become the new normal for Americans, and it has to do with the notion that happiness must be pursued above all else. The concept is even baked into the Declaration of Independence.

Whippman recently joined the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111 to discuss her new book, America the Anxious: How Our Pursuit of Happiness Is Creating a Nation of Nervous Wrecks.

An edited transcript of the conversation follows.

Knowledge@Wharton: A state of perpetual anxiety does feel like a new norm right now for most Americans.

Ruth Whippman: Absolutely. The World Health Organization says that America is the most anxious country on the planet and by a wide margin. A second-place country is very far down the list from America. We are, in this country, more likely to suffer from clinical symptoms of anxiety than anywhere else on the planet.

Knowledge@Wharton: You’re a British transplant. In doing this book, were you able to gain perspective on what’s going on here that maybe some of us don’t realize?

Whippman: As an outsider, when you come into a place completely new, you perhaps see things in a different way. It was quite the culture shock. We moved here when my husband got a job in Silicon Valley. We moved from fairly gray London to beautiful sun-drenched California. I imagined that my life here was going to be absolutely perfect. Free of anxiety. The beaches. The weather. Everything was going to be wonderful. But I started to notice very quickly that there was this real kind of sense of anxiety here — that far from being in this land of Instagrammed perfection, people were anxious about their lives and not necessarily any happier than the people back in London, who were perhaps a little bit more negative, a bit more cynical.

Knowledge@Wharton: What do you think are the reasons Americans are so anxious right now?
Whippman: There are lots of genuine reasons why life can bring anxiety. Money worries, inequality, the state of the economy, health care — those sorts of big issues. But one of the things that I identified pretty early on was that people seem to be very culturally preoccupied with this idea of happiness, of finding happiness. I was having conversations with people, and the same topic would come up again and again, with people really kind of agonizing about it. Am I happy? Am I as happy as my neighbor? Am I as happy as my friends? Am I as happy as everybody on social media? Could I be happier if I tried harder? There seemed to be this real anxiety about being as happy as you could be.

“Mindfulness starts to feel like a tiny, teeny Band-Aid on a much, much bigger problem.”
I started looking into it, and this is a multibillion-dollar industry in the United States. This industry is devoted to this idea that if we just try a bit harder, if we do another thing, read another book, try another class, then we can become happier. And I think this is one of the big causes of anxiety in American society.

Knowledge@Wharton: Through what avenues is this a multibillion-dollar industry?
Whippman: It’s what you think of as the traditional self-help industry — the books, the apps, the causes. That amounts to about $11 billion. To put it in context, that’s about the same size as Hollywood. Recently, there’s been a new kind of subsidiary industry: for lack of a better term, the quasi-spiritual thing – [including] meditation, mindfulness, yoga. Although these things are supposed to be spiritual practices, they amount to probably the same in terms of the size of the industry.
Sponsored Content:

This is a huge new thing. It’s this idea that if we just buy another app or read another book or try another thing, then this new, improved version of ourselves will be fully self-actualized and fully happy. I think that, itself, is causing anxiety.

Knowledge@Wharton: What is the impact financially, culturally and in other areas?

Whippman: This idea of the American Dream — if you really work hard for something, then you can have it — is just out of reach; we’re trying to get to this kind of happy ever after. Psychologically, that’s pretty tough on people because our emotions don’t work quite like that. Just by trying harder, we can’t actually control our own emotions and make ourselves happier in that way.
It’s having a huge impact culturally. In the book, I start to look at all different areas of life. I look at the workplace, religion, social media, parenting. These ideas about making ourselves as happy as possible have infiltrated all different areas of American life.

Knowledge@Wharton: Focusing on the corporate end, there are people who have a mix of anxiety from both personal life and professional life, which ends up being a toxic formula for them. Think there are people who have anxiety in their personal lives, but work ends up being a catharsis.
Whippman: Work means different things to different people, and that depends on what your job is, how you feel about it, who your employer is. But I think that one trend that’s becoming true across the board, at least for professionals, is that we are working in America longer hours than almost anyone else in the world and than ever before in recent times. There’s a blurring of the lines between personal life and work. We’re never fully switched off. We’re on our cellphones; we’re checking our email every five minutes. There’s a joke about this new mantra that instead of work/life balance, come to me and talk about work/life integration. It’s something that works very well for employers and maybe less well for employees.

I’ve talked in the book about this whole idea of happiness in the workplace. It used to be that work was work and home was where you tried to find happiness and your social life and all the rest of it. There’s been a deliberate blurring of those boundaries. You see it where workplaces are offering dentists and doctors and video games and free food and that sort of thing to keep people working longer hours. [Employers are] even sending their staff to happiness training and mindfulness training.
Knowledge@Wharton: I have a 10-year-old and 7-year-old twins, and their school is doing

mindfulness training for kids. I’ve come around a little bit on it because I think it does help kids. Our kids are feeling more pressure at a younger age than they’ve ever felt before.

“Just by trying harder, we can’t actually control our own emotions and make ourselves happier in that way.”

Whippman: I think you’re absolutely right. Mindfulness has come to schools, to the military, to workplaces. It’s in corporations. It is a multibillion-dollar industry. I think mindfulness starts to feel like a tiny, teeny Band-Aid on a much, much bigger problem. You say your kids are under so much pressure, and I think that’s true of my kids and kids across the board and adults in the workplace. It’s this idea that we work these incredibly long hours, we’re very stressed and there’s pressure on us to be more productive than ever before. “Oh, and here’s your hour of mindfulness training every week.” It feels like you’re not really addressing the actual problem. You can’t pay your rent, you don’t have any health insurance, but oh, try a bit of mindfulness. You’re in a burning building and here’s a tiny little fire extinguisher. Try and sort it out.

The other thing about mindfulness is that there are great, grand claims for it. I am not saying that mindfulness is not helpful to certain people. It is. But the evidence for it is much weaker than is commonly claimed. There was a big meta-analysis [conducted] a year or two ago that showed there was no real difference in benefit between doing mindfulness and doing any kind of relaxation technique. Whatever that is for you, whether it’s getting a pedicure or just talking to a friend or listening to some music, mindfulness is of no benefit beyond that.

Knowledge@Wharton: Were there companies that you talked to that really showed that there was a level of happiness there? Or does pretty much every company have a level of angst in it?

Whippman: Some companies are better places to work than others, no doubt about it. I went to visit Zappos, which is very much pushing this happiness agenda. The CEO of the company, Tony Hsieh, is very interested in positive psychology. His company’s message is delivering happiness. You go to that company and there are balloon animals and parades and fireworks and they have out-of-hours socializing and free snacks. It’s very strongly encouraged that you socialize with your colleagues out of the workplace. I think this is a kind of corporate culture that is becoming more common. As I said before, this is blurring the lines between what is your boss’ business and your boss’ concern and what isn’t. For some people, that works great. Some people want to go to work and have a parade come past their desk and do a little disco and that kind of thing. For me, as a kind of awkward British person, I think it would be absolutely horrendous.

Knowledge@Wharton: Some companies make a Friday happy hour at the office the norm. A friend who worked for a big retail company told me they would have a once-a-month beer bash at the office. They were playing drinking games.

Whippman: That is particularly common around Silicon Valley and that kind of California culture. It’s this idea that your work mates should be your friends. They call it “cultural fit.” It’s the company culture, and you should take part in that. But I think it’s problematic for a lot of reasons. For me, I’m a mom, I work, I have young kids. I don’t want to be getting drunk in the office with my work mates. I want to be home. This pressure that the office has to be my social life, that I have to not just do my job and collect my paycheck, but I also have to emotionally perform and be a part of this whole big thing — I don’t want that. I think this socializing culture is particularly tough on women with families.

Knowledge@Wharton: This is something driven in part by millennials. Do you see it continuing for a long time, or will the next generation look at it differently?

Whippman: It’s hard to say because there could well be a backlash. People could say, “Just give me some space, I just want to go home. I don’t want to be doing my dry cleaning at work.” There [was an item] in the news recently that Facebook was actually paying for their female employees to have their eggs frozen so that they could delay child bearing. I feel like it’s getting to the point where it’s an intrusion on your personal liberty, your personal space and your private life. They’re not forcing anyone to do this, but it’s little by little.

Knowledge@Wharton: Some of these companies believe that these perks, like dry cleaning, are the way to go because you’re building culture within the corporation. There are people for whom that works perfectly.

“I think people are paradoxically likely to experience more happiness if they stop trying quite so hard.”

Whippman: The key element here should be choice. When you’re talking about making your company a good place to work that attracts good employees, there is nothing wrong with that. But I think cultural fit can quite often be a smoke screen for, “We only want a certain type of person to work at this company.” That can be problematic for diversity and for all kinds of reasons. Cultural fit means that you are kind of a big funster, that you drink with the boys every night. It could work very well for a 24-year-old software engineer who doesn’t have anywhere else to be, but it might not work so well for someone with a family or from a different kind of culture. It’s easy to say it has no bearing on your ability to do the job well.

Knowledge@Wharton: With all of this pursuit for happiness, a little less happiness ends up being a good thing from time to time?

Whippman: Well, not a little less happiness. But I think people are paradoxically likely to experience more happiness if they stop trying quite so hard. One of the things I noticed when we first moved here is that people talked about happiness almost like people talk about going on a diet. There’s no pleasure involved in it, but if I just try a bit harder, it would make me a good person or a better, more improved person to do this. I think to just take a step back, stop worrying about it, stop really pursuing it so relentlessly and just kind of hope that it comes along the way will actually lead to more happiness. There is quite a lot of research that backs that up, too.

Knowledge@Wharton: Are we setting ourselves up for another generation to follow in that path?
Whippman: This is a really big trend in parenting at the moment — that we are so invested in our kids’ happiness. When I was a kid, my mom [would say], “Off you go, go and play on your own, do your own thing,” and she wasn’t micromanaging my happiness. She wasn’t micromanaging every moment of my day, optimizing my experience.

With the coming of these helicopter parents who hover over our kids a lot, kids of college age now show more anxiety than any previous generation. There was one study recently that showed that an average high school or college student now has the same levels of anxiety as a psychiatric patient in the 1950s of a similar age. That’s grading it on the same test. So, I think we are creating a generation of anxious kids.

I think also for that generation, which has grown up with social media, happiness is really kind of the currency of social media. It’s all about putting your best foot forward and putting your blissful photos on Facebook where everybody is having a great time and everyone is at a great party and you’re Instagramming and it’s perfect. Everyone is talking about being authentic all the time, so obviously, it’s as authentic as nothing. I think that puts a great pressure on people now.

Social media is not one thing. There’s lots of different ways that people interact with social media. But one of the big things is making our lives seem as blissfully wonderful as they possibly can be. And it’s very easy; you just compare yourselves to others. I do it myself. We went apple picking in an orchard recently with my kids. Frankly, it was kind of a miserable day. It was really hot and our kids were whining the whole time. There was no water, there were no restrooms. But I still posted the one picture on my Facebook account of my kids smiling and holding up the apples and looking so happy. Everybody looking at that would think, what a perfect day they’ve had. And I do the same. I look at my neighbors or my friends and I say, “God, why is my life not like that?” It’s never been easier to compare ourselves unfavorably to other people.

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Thursday, December 8, 2016

Making of a mammoth tragedy 12-09

The decision to demonetise will cause grievous injury to the honest Indian who earns wages in cash. The dishonest black money hoarder will get away with a mere rap on the knuckles

It is said that “money is an idea that inspires confidence”. At the stroke of the midnight hour, on November 9, 2016, the confidence of more than a billion Indians was destroyed. Prime Minister Narendra Modi had declared that more than 85 per cent of the value of money held in notes of Rs.500 and Rs.1,000 was worthless overnight. In one impetuous decision, the Prime Minister has shattered the faith and confidence that hundreds of millions of Indians had reposed in the Government of India to protect them and their money.

The Prime Minister in his address to the nation said, “there comes a time in the history of a country's development when a need is felt for a strong and decisive step,” and propounded two primary reasons for this decision. One was to check “enemies from across the border… using fake currency notes”. The other was to “break the grip of corruption and black money”.

Both these intentions are honourable and deserve to be supported whole-heartedly. Counterfeit currency and black money are as grave a threat to the idea of India as terrorism and social division. They deserve to be extinguished using all the firepower at our disposal. However, the popular saying “the road to hell is paved with good intentions” serves as a useful reminder and warning in this context.

The underlying premise behind the decision of the Prime Minister to render Rs.500 and Rs.1,000 currencies as illegal overnight seems to be this false notion that ‘all cash is black money and all black money is in cash’. This is far from reality. Let us understand why.

Life thrown into disarray

More than 90 per cent of India’s workforce still earn their wages in cash. These consist of hundreds of millions of agriculture workers, construction workers and so on. While the number of bank branches in rural areas have nearly doubled since 2001, there are still more than 600 million Indians who live in a town or village with no bank. Cash is the bedrock of the lives of these people. Their daily subsistence depends on their cash being accepted as a medium of valid currency. They save their money in cash which, as it grows, is stored in denominations of Rs.500 and Rs.1,000 notes. To tarnish these as ‘black money’ and throw the lives of these hundreds of millions of poor people in disarray is a mammoth tragedy. The vast majority of Indians earn in cash, transact in cash and save in cash, all legitimately. It is the fundamental duty of a democratically elected government in any sovereign nation to protect the rights and livelihood of its citizens. The recent decision by the Prime Minister is a travesty of this fundamental duty.

Black money in India is a genuine concern. This is wealth that has been accumulated over years by those with unaccounted sources of income. Unlike the poor, holders of black money have access to various forms of wealth such as land, gold, foreign exchange, etc. There have been various attempts by many governments in the past decades to recover this illicit wealth through actions by the Income Tax department, the Enforcement Directorate and schemes such as Voluntary Disclosure. These measures were targeted strikes at only those suspected to be holders of such unaccounted wealth, not on all citizens. Evidence from these past attempts has shown that a large majority of this unaccounted wealth is not stored in the form of cash. All black money is not in cash, only a tiny fraction is. Against this backdrop, the decision by the Prime Minister is bound to have obverse implications by causing grievous injury to the honest Indian who earns his/her wages in cash and a mere rap on the knuckles to the dishonest black money hoarder. To make it worse, the government has actually made it easier to generate such unaccounted wealth in the future by the introduction of a Rs.2,000 note. This brazen policy measure has neither tackled the stock of black money holistically nor has it stemmed the flow of it.

It is no surprise that the logistical challenge of replacing billions of old currency notes with new ones is a monumental one. It is a huge challenge in most nations, and in a country as vast and diverse as India it was bound to be doubly so. This is also one reason why most nations that have undertaken such currency swap operations have done so over a certain time period and not as a sudden overnight operation. It is heartbreaking to see and hear of millions of poor Indians standing in long lines to withdraw some money for basic sustenance. As someone who has experienced long lines for rationed food during war time, I never imagined that one day I would find my own countrymen and women waiting endlessly for rationed money. That all of this suffering is due to one hasty decision makes it even more disconcerting.

The macroeconomic impact of this decision of the government is likely to be hazardous. At a time when India’s trade numbers are at multi-year lows, industrial production is shrinking and job creation is anaemic, this policy can act as a negative shock to the economy. It is indeed true that India’s cash to GDP ratio is very high vis-à-vis other nations. But this is also an indicator of the Indian economy’s dependence on cash. Consumer confidence is an important economic variable in a nation’s growth prospects. It is now evident that this sudden overnight ban on currency has dented the confidence of hundreds of millions of Indian consumers, which can have severe economic ramifications. The scars of an overnight depletion of the honest wealth of a vast majority of Indians combined with their ordeal of rationed access to new currency will be too deep to heal quickly. This can have ripple effects on GDP growth and job creation. It is my humble opinion that we as a nation should brace ourselves for a tough period over the coming months, needlessly so.

Unintended consequences

Black money is a menace to our society that we need to eliminate. In doing so, we have to be mindful of the potential impact on hundreds of millions of other honest citizens. It may be tempting and self-fulfilling to believe that one has all the solutions and previous governments were merely lackadaisical in their attempts to curb black money. It is not so. Leaders and governments have to care for their weak and at no point can they abdicate this responsibility. Most policy decisions carry risks of unintended consequences. It is important to deftly balance these risks with the potential benefits of such decisions. Waging a war on black money may sound enticing. But it cannot entail even a single loss of life of an honest Indian.

Dr. Manmohan Singh was Prime Minister of India from 2004 to 2014.

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Punjab National Bank partners with Ola to deploy mobile-ATMs 12-09

Punjab National Bank (PNB) on Tuesday announced a partnership with cab aggregator Ola to aid cash withdrawals for the citizens of Delhi and the National Capital Region (NCR).

“Through the extensive network of Ola cabs present across the state, we are able to bring these mobile ATMs closer to citizens, saving them from the hassles of cash withdrawals,” said Deep Singh, business head (North), Ola, in a statement.

PNB ATM machine equipped Ola cabs have been stationed in Gurgaon, Laxmi Nagar, Janakpuri, Civil Lines, AIIMS, Netaji Subhash Place, Manesar, Nehru Place, Bhikaji Cama Place, Mayur Vihar, Faridabad, Tilak Nagar, Rajouri Garden and Greater Kailash, with Ola volunteers and PNB executives, to assist people in withdrawing cash without any hassle.
Earlier this week, Ola rolled out similar activity for the citizens of Mumbai, Bengaluru, Chennai, Pune, Kolkata, Chandigarh, Ahmedabad, Hyderabad and Jaipur, in partnership with Yes Bank.
“Through this activity, Ola has increased touch points to PNB’s existing network by creating more avenues for withdrawing money through micro ATMs/point of sales machines,” added Rajesh Yaduvanshi, zonal manager, Delhi and NCR, Punjab National Bank.

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