Shadow Banking

As I write, Shanghai is going gung-ho, on shadow banking via web. A significant chunk of unregulated $ 2.4 Trillion market in China is eventually moving online.
What specially caught my attention when I researched further was, that this conduit of capital, currently makes up 25-30% of the World's Financial System. In 2010 itself, just before when governments world over started tightening their credit policies, the market was an estimated $ 60 trillion* , truly reflecting, the impact it has on the global economy.

And to my thinking, China's spurt in such unorganized retail lending, points at 2 things for Asia:
- Firstly, it aptly validates the acuteness of credit shortage all across Asia. Post 2010, with an ever increasing tightening of credit, there has been a mass acceptance of such institutions primarily because of more hurdles and checks put by banks and at the same time, quick availability of desired credit from these shadow banks without any process hiccups.
- Secondly, it's also a precursor to the future Asian Credit crisis. With the sudden surge of such institutions and hence, of such unorganized loans, the quantum of bad debts are bound to go up, as these institutions are not guided/governed or regulated by central bank. These toxic debts will eventually worsen the overall credit flow. That day may not be far then, when analysts and economists over the globe start envisaging Asian crisis, on the footprints of European or American credit defaults.

However, shadow banking is not all that villainous....... It offers customers a wider array of choices, in terms of credit supply. These institutions can often provide credit, that is more cost-efficient than banks. And most importantly, to customer segment , who might not otherwise have such access, in a way, aiding respective governments, in their financial inclusion drive.
There are disadvantages though ... These institutions have the tendency to lure customers by doling out more rewards out of the investments, much more than banks, thereby increasing risks mounting in the financial system. On a more of illegal means of funding, these unregulated shadow institutions can be used to circumvent the strictly regulated mainstream banking system and therefore avoid rules designed to prevent financial crises.
If we recall, it were these shadow banks sitting in tax havens, that created the real estate bubble during first few years of this millennium that jettisoned the world economy out of the safety zone and landing amidst the Financial Crisis which we are still struggling from....

*according to the Financial Stability Board , a regulatory task force for the world's group of top 20 economies (G20).

FDI in Retail - Is it Good for India?

Referring to today's news of Mulayam Singh supporting Left, JD(U) and Trinamool Congress in opposing 51% FDI in Multiband Retail, I feel that Prime Minister's intention to bring FDI in Retail is good for India.

It will offer broad range of choices and better quality to end consumers and will bring in many new business opportunities for Small and medium enterprises across India. With increased investment in Retail sector , the Quality of products will improve, providing greater transparency, better monitoring of adulteration and counterfeit products.FDI in Retail would drive efficiencies leading to increased affordability and International level shopping facilities for consumers. As the MNC’s such as Wal-Mart , willing to establish their brands here, spread, bulk buying from SMEs will increase leading to more business opportunities.
Besides, Organized Retail and Mom N Pop Stores (kiranas ) can very easily co-exist, as they do in other economies around the world. In fact, wholesale cash-and-carry stores such as ‘Metro’ allows many kiranas to flourish through access to quality, low-priced merchandise and produce, business training and much more.
In the process, FDI in Retail , would make kiranas to be competitive, by enhancing their customer proposition such as adding more brands on their shelves, better display, renovation of the store, acceptance of credit cards, faster home delivery etc.

All this will eventually benefit the end consumer.

Manesar Shutdown@Maruti

This is with reference, to the recent shutdown at Maruti after worker riot at the Manesar plant. Incidents such as at Manesar's, is highly condemnable. It's an admonition to a dirty picture ( which labor forces can paint).
Peeping into history, during Pre-Liberalization Era ( 1947-91) labor forces experienced protected markets and dominant status of manufacturing.
But now markets drive the economy. Contractual jobs, cost cutting and over production (to achieve operational efficiencies) is the new mantra of industries. Concurrently, the motto of the successive governments too, moved away from creating an egalitarian society to facilitating the growth of enterprises and entrepreneurship. As a consequence, Workers feel over-exploited and they resort to such means, as happened at Manesar.
There is an urgent need for the parliament to revisit the age old rusted, Industrial policy. The objective should be to re-haul the Labor policies as a whole rather than just providing compensation to suffered managers and punishing those gang of 90 odd workers.

Mr. Gandhi, its time for you to upgrade Congress' software

Yesterday, Mr. Rahul Gandhi stated to media "I will soon assume a larger role".
To my mind, he should not procrastinate, if he wishes to give a new lease of life to Congress.
It's a high time Rahul assumes the administrative role. Congress now needs a urgent face-lift and the aam-aadmi expects some real deliverables providing some relief to the economy, which is over-heated at present.
Every Product , has a Life-Cycle and so is true with Congress party. Founded originally in 1885,every time the party appeared entering into period of Decline, the party tried to renew its license to live & rule, by degenerating into smaller parties-- such as Triamool Congress, NCP etc... (for that matter, even Janta Party should have thanked Indira for their birth)
Rahul is trying hard to revive the brand Congress, superficially though, by visiting villages, having food and getting his pictures clicked. He tried upgrading the Congress Hard-ware, by constantly injecting the new blood into the party. Now he also needs to look at the Soft-ware- that is, framing workable government policies.
He needs to understand that in this era, it's not only the Economy, but even Politics is market driven. Customer segmentation and New Product offerings are happening at exponential rate. During every General Election there is some regional party or the other cropping up, that might be eating on Congress' vote pie. In Today's time, every product is shouting as loud to be heard as much in the market, leading to a cacophony in customer's mind.The winning brand will have to understand the customer need( Reason Why), innovate and provide the right solution (Reason to Buy).

 Congress need to be heard differently. It needs to built in the perceived differantiation. If voters see them in action only while arresting Anna Hazare and trapping Ramdev into Tax-issues just when he was raising concerns on black money.. while, no action when it comes to many "champions of corruption" such as Kalmadi or Raja , they are bound to get the flak.
 Few years back NDA lost their chair as they believed that India was shining.We (Voters) are not fools. We are patient. We truely envisage where growth is happening. Rather than GDP growth, Per Capita Income Growth what we see is Corruption growing, Dollar Growing , Inflation growing and most of all the Economic Divide between "Bharat" and "India" growing.

Although currently, there is no model political party which they can benchmark to (and thats why they seem to be complacent), nonetheless this should not be the reason for their inactivity....

After all Congress is the genesis of all Indian Political parties if history is anything to go by.

So Rahul -- should assume some administrative responsibilities maybe ministries such as--  Agriculture ( in the case, Pawar  relinquishes this post) or maybe Rural Development ... which will give him ways to connect to "Bharat" while leaving in "India".

Pranab Mukherjee: The President-in-Process

Come Day after tomorrow, and the fate of Presidency would be sealed by the Electoral College.From the arithmetic of what it appears there is over 70% Probability that, Mr. Mukherjee is going to be our 13th Mr. President.But what makes most of us so optimistic in concluding , that he would be the next President of the biggest democracy of the world, much before the votes are casted?
Is it the Sonia Effect or the Fine-tuned Political Acumen of Mr. Mukherjee (Pranab Effect)?
Well , to my mind - It's both.

Sonia Effect: Sonia would never ideally have wanted to recommend Pranab's nomination for presidency, given the choice.Pranab never really enjoyed the support of Congress-S [read Congress-Sonia :)], as he did from Congress-I. One Mrs. Gandhi (Indira) completely relied on him, but the same hypothesis cannot be framed for another Mrs. Gandhi( Sonia).In fact it is the weakening clout of Gandhi Family on Indian Polity as well as on UPA allies, that provided the much needed support for Pranab's nomination.Issues such as - Increased Corruption, Dwindling Economy and Ineffective government policies, in turn fueling the ever increasing growth of poverty, inflation and Dollar valuation , degraded Sonia's clout she commanded over her allies.Add to it, Congress performance have not been that great offlate - as it lost Goa, Punjab, U.P., Delhi, Mumbai and M.P. in local or state elections.
Willy-nilly, Sonia Gandhi had to give nod for Pranab's nomination.

Pranab Effect: Mr. Mukherjee has great Networking & Negotiation Skills. This he capitalized on this time (not to say that, PM (read Pranab Da) didn't wish to be a PM).After the last General Elections of 2009 , when it became clear to Mr. Mukherjee, that his last opportunity to become Prime Minister is over. He clearly channelized all his skills in communicating 2 things - 1st : He eventually announced in October 2010, at various forums such as India Today, that this would be his last stint of his active political career— he would not be a part if another UPA government comes to power. 2nd: Since 2010 , he made his wish to become President known not only to the Congress High command but also to all major non-Congress parties, with many of whom he had built personal rapport over a 40 year long political stint.

For the next 2 days, entire nation would be keenly watching over the events and somewhere these 2 above described factors will play there their own roles in catalysing the entire process.