1. Business Models had undergone a big transformation in the last 10 years.
2. Initially, the model was capital intensive. Now the model is asset light.
3. The players who have higher level of variable costs in their operations are able to achieve higher operating margins. The need for high capital is less on account of very high levels of outsourcing.
4. Higher variable cost provide a high level of flexibility in operations and helps in faster ramping up with minimum risk.
5. Now almost most of the operations relating to Telecom services are outsourced.
6. India had the highest tariffs in the world . Today India has the lowest tariffs in the world.
7. More than 95% of business was post paid and now about 95% of subscribers are pre paid ( where the risk of not collecting the dues is very less ).
8. Initially, the price competition in the sector was very low and operating margins were very high. Now the price competition is very high and operating margins are coming down.
9. The core business of Telecom services is not profitable. But services related to Telecom are profitable and players in the Eco system are operating profitably. Phone manufacturers, Content Providers, Tower owners, Networking managers, Telecom Retail, BPO providers and IT services providers are part of the Eco System today. The core business of voice is not profitable any more and it has to be supported by Data and other value added services.
10. Only a few companies in the world have most of the above services and those who have the above could look at synergies and leverage of synergies available within a group.
11. Going forward, only the leading players in the field and those who consolidate their operations will survive in the market.
12. The government's proposal to allow easy exit of players should facilitate the mergers and acquisitions and optimal use of spectrum.
13. To develop a robust business model, the companies have to develop host of Products , Services based on Telecom which will add lot of value to the Product portfolio and increase the revenue . The services could include TV on Mobile, Banking on Mobile, Mobile Data Services, use of cloud computing for operations, High speed wireless, High speed Broadband and whole host of data services through mobile.
14. Going forward, Telecom industry players will be competing with Banks, DTH, Cable Services in providing Banking and Entertainment services.
15. The companies in the sector have to tailor strategies in line with the developments in the Eco system, which would ensure a development of a competitive Strategy.
Wednesday, September 15, 2010
Wednesday, September 1, 2010
GDP Growth Q1F11
GDP Growth - 1 September 2010
I am happy that I was the first one to predict after the last year’s Union Budget that our GDP would grow close to 7.5%. We ended the year with a growth of 7.4%. At that point the best prediction of GDP was at 6.1% by the Economists in the world. Last year, the growth momentum came from various sources including a large government stimulus programme, Sixth pay commission Effect and vibrant rural Economy.
This quarter’s growth of 8.8% is encouraging and since the rainfall is good , this year agricultural growth rate is likely to be good and the year could end with a GDP growth of around 9.5%. The momentum in the private Sector has picked up in the last few months and organizations in private sector had announced plans for expansion. The Sixth pay commission effect is likely to last for another year. Rural Economy continues to do well.
The inflow of funds to government coffers were much better than the expected level mainly aided by a high collection on account of spectrum fee collected by Telecom Ministry. The government is also planning to capitalize the land bank and it is happening at both Central and state levels which should ease the pressure on Government Finances.
FDI so far was lower than last year but inflows on account of FII’s so far accounted for $ 13 bn and the year is likely to end with an inflow ranging from $ 16 – 20 bn. Since the Indian Growth Story is intact and most of the companies have shown a good Sales and Profit growth and potential for growth in the next few years is good, the Investors from abroad are likely to increase their focus on India. This will also be strengthened by the increased presence of Multinationals in various sectors in India including Auto, IT, ITES, Pharma and others. Government could liberalise few more sectors including Life insurance, which would help to attract more FDI into India.
Inflation rate is likely to soften in the light of better agricultural production which should ease the pressure on RBI to increase the interest rates. Keeping interest rates at present levels will reduce the pressure on Government finances and make easy availability of credit to the Corporates and Individuals.
Going forward, the following areas require focus to support the growth momentum
• Bottlenecks in distribution of power to be reduced on a fast track basis and achieve higher level of productivity in the existing power plants. The best practices adopted by private transmitting companies could be transferred to state owned utilities. Transmission and Distribution Loss could be reduced by increasing the monitoring of consumption of power at a transformer level covering each locality. More manufacturing capacity could be created for manufacturing power equipments. Hurdles for implementing new projects to be cleared on a fast track basis.
• In many varieties of agri produce, the productivity levels per acre of land compares very poorly with the other countries in the world. Objectives could be set to achieve the best levels of productivity in five years from now and action plans could be identified for achieving the same. So far, many new initiatives were taken by government to address the productivity. But there is a need for an institutional reform to achieve the desired productivity levels. Like what has happened in the case of Milk, the concept of Agri co-operatives can be created in all parts of India on the similar lines of NDDB and State Milk Co-operatives.
• Infrastructure. Requires a big investment. At present mega projects are awarded which requires large organizations with large financial resources. Only few organizations, have the capability to execute very large projects. To expedite the Infrastructure development, to fill the projected gap, large projects could be broken up into small projects and awarded to more companies. This will help to expedite the infrastructure development. The projects in rural and semi urban areas could be integrated with the social development schemes implemented by the government.
• The capital markets could be made more vibrant by allowing Corporate Bonds, Municipal Bonds and other securities to be listed on the exchanges. Any instrument carrying a issue value of more than Rs.10 cr could be listed on the stock exchanges. This will help to create a vibrant market for Debt and other instruments.
• The government could continue to tap the non conventional sources of funding thereby easing the pressure on Government finances and from time to time identify support measures to be provided to Export led industries so that the external balance is maintained and will be within control.
I am happy that I was the first one to predict after the last year’s Union Budget that our GDP would grow close to 7.5%. We ended the year with a growth of 7.4%. At that point the best prediction of GDP was at 6.1% by the Economists in the world. Last year, the growth momentum came from various sources including a large government stimulus programme, Sixth pay commission Effect and vibrant rural Economy.
This quarter’s growth of 8.8% is encouraging and since the rainfall is good , this year agricultural growth rate is likely to be good and the year could end with a GDP growth of around 9.5%. The momentum in the private Sector has picked up in the last few months and organizations in private sector had announced plans for expansion. The Sixth pay commission effect is likely to last for another year. Rural Economy continues to do well.
The inflow of funds to government coffers were much better than the expected level mainly aided by a high collection on account of spectrum fee collected by Telecom Ministry. The government is also planning to capitalize the land bank and it is happening at both Central and state levels which should ease the pressure on Government Finances.
FDI so far was lower than last year but inflows on account of FII’s so far accounted for $ 13 bn and the year is likely to end with an inflow ranging from $ 16 – 20 bn. Since the Indian Growth Story is intact and most of the companies have shown a good Sales and Profit growth and potential for growth in the next few years is good, the Investors from abroad are likely to increase their focus on India. This will also be strengthened by the increased presence of Multinationals in various sectors in India including Auto, IT, ITES, Pharma and others. Government could liberalise few more sectors including Life insurance, which would help to attract more FDI into India.
Inflation rate is likely to soften in the light of better agricultural production which should ease the pressure on RBI to increase the interest rates. Keeping interest rates at present levels will reduce the pressure on Government finances and make easy availability of credit to the Corporates and Individuals.
Going forward, the following areas require focus to support the growth momentum
• Bottlenecks in distribution of power to be reduced on a fast track basis and achieve higher level of productivity in the existing power plants. The best practices adopted by private transmitting companies could be transferred to state owned utilities. Transmission and Distribution Loss could be reduced by increasing the monitoring of consumption of power at a transformer level covering each locality. More manufacturing capacity could be created for manufacturing power equipments. Hurdles for implementing new projects to be cleared on a fast track basis.
• In many varieties of agri produce, the productivity levels per acre of land compares very poorly with the other countries in the world. Objectives could be set to achieve the best levels of productivity in five years from now and action plans could be identified for achieving the same. So far, many new initiatives were taken by government to address the productivity. But there is a need for an institutional reform to achieve the desired productivity levels. Like what has happened in the case of Milk, the concept of Agri co-operatives can be created in all parts of India on the similar lines of NDDB and State Milk Co-operatives.
• Infrastructure. Requires a big investment. At present mega projects are awarded which requires large organizations with large financial resources. Only few organizations, have the capability to execute very large projects. To expedite the Infrastructure development, to fill the projected gap, large projects could be broken up into small projects and awarded to more companies. This will help to expedite the infrastructure development. The projects in rural and semi urban areas could be integrated with the social development schemes implemented by the government.
• The capital markets could be made more vibrant by allowing Corporate Bonds, Municipal Bonds and other securities to be listed on the exchanges. Any instrument carrying a issue value of more than Rs.10 cr could be listed on the stock exchanges. This will help to create a vibrant market for Debt and other instruments.
• The government could continue to tap the non conventional sources of funding thereby easing the pressure on Government finances and from time to time identify support measures to be provided to Export led industries so that the external balance is maintained and will be within control.
Tuesday, April 13, 2010
Permanent Stimulus For Economic Growth
Permanent Stimulus For Economic Growth
The countries which had shown a good growth rate , growing for long periods of time, provided stimulus to the Economic growth through well defined / planned economic policies which are in contravention of the prescribed economic Policies for Growth. Two examples today are China and USA. In USA, the government went ahead providing stimulus in the form of Moral Support to Industries, Benign Policies, Low interest rates and heavy borrowing from the other countries to Sustain the Economic Growth. This was mainly supported by Dollar which is the most accepted currency in the world coupled with the fact that a robust capital market which provided avenue for raising funds through various instruments not only domestically but also from outside US . The stimulus in US was given at the cost of general health of the Economy, which is very fragile, even today.
Whereas in the case of China, the stimulus for the Economy was provided through many ways and till today, the stimulus continues for a long period of time which is helping the Economy to show continuous good rate of growth. The following factors helped the Chinese Economy to sustain the growth rate even today.
1. Grand Vision. The Political Leadership decided that China should become an Industrial power and in line with the Population rank, they should develop their industries and take them to number one in the field they were operating. With that in Mind, the plans drawn for Economic Development and Infrastructure Development were in line with the objectives of reaching number one position in many segments of the industry.
2. Export Led Strategy. The policy makers identified that to become an industrial power they had to go for cost leadership strategy which would help to achieve a very high level of exports, since the strategy would create a competitive position which would be difficult for other countries to challenge. The cost leadership was pursued with great vigour and the country achieved the cost leadership position in the areas where they became leaders in exports. This helped to increase the size of manufacturing in the overall economy as well as earn Forex in a big way. The exports were subsidized at every level of value chain in the production system.
3. Risky Lending practices. Since most of the enterprises in China belonged to Government and earlier government owned enterprises, the loans were disbursed violating the prudent practices on lending. At one point in time, in this century, the NPA in Chinese Banking system was close to 50%. Since there was no pressure for the enterprises to worry about financial management, they pursued the production targets with increased focus. The focus of corporates were on production than on any other function.
4. Low Interest Rates. The government has a full control on the banking system and ensured that the loans are available at very competitive rates. The interest constituted a very small portion of the overall cost of products. The competitive interest rates in the economy helped Large, Medium and Small Enterprises to avail loans at attractive rates. This has substituted the minimal participation of stock markets in the Chinese Economy. Only in the last few years, the stock markets have become vibrant and Investment in equity by retail investors is showing signs of promise.
5. Inflation. Since there was a good control on Interest rates and the domestic economy was under the full control of the government, Inflation levels were at reasonable levels. The government had taken concerted efforts to control inflation .At CPI level , only in 2007, the it was above 4 at 4.8 and at 5.9 in 2008 but it came down to – 0.7% in 2009.
6. Fixed Exchange rate. For a long period of time, the government pegged its currency to the dollar and even after deciding that they should move towards realistic rates, the currency was allowed to appreciate marginally, only for a few months and again a strategy of pegging the currency to the dollar policy was pursued. This helped the country to retain its competitiveness in exports.
7. Large inflow of funds. Since the economy had shown a good promise for growth and the currency fluctuation was minimized, the country was able to attract large amount of foreign funds. Despite, large inflow of foreign funds, the enterprises were certain about exchange rates and its minimal impact on financial performance . Hence they concentrated more on the core business than on managing finance.
8. Control on Cost of other resources. There is a system of permission for workers to work in one city , thereby restricting the free movement of labour across the cities/towns. Further, the workers are made to work long hours with clearly defined targets for production. Since government transferred the companies to private sector, in most cases, the transfer price of enterprises to private sector was at very low rates which resulted in lower Depreciation and other infrastructure costs.
9. Good Implementation. After planning large projects, the best practices in project implementation was adopted and mammoth projects were completed as per the plans and achievement of physical targets took precedence over the financial aspects.
10. Political System. All the above was possible , since the entire country is run like a Corporate Enterprise. Those who reach the central leadership should have demonstrated their skills at lower levels of administration ,where they were able to demonstrate their competence and management skills. When investment takes place at a provincial level, the provincial authority has the full powers to give licenses and the levels of decision making was less and the uncertainity in implementation of projects was minimized. This will be very difficult in a democratic and plural society where the views of all the stakeholders are to be taken before making decisions.
There are concerns that the Chinese growth will come to a stop and the bubble will burst. This is not likely to happen, since China is a large country and still many regions are in the process of development and many people are under poverty line. The growth in China would be sustained through the increase in Domestic consumption even if the Trade position deteriorates with developed countries but likely to be off set by trade with developing countries ( where China has started increasing the engagement with these countries in a big way). China is likely to continue the Stimulus it is providing for many more years and it has developed the required resources to support this growth. But the extent and nature of stimulus provided will vary from what was observed in the past.
It will be a challenge for Democratic countries and countries with higher level of transparency to adopt all the practices like in China but at least the aspects relating to Management of the Economy including Management of Interest rates, Inflation, Currency Management and Project Planning and Management could be strengthened to achieve higher levels of Economic Growth.
The countries which had shown a good growth rate , growing for long periods of time, provided stimulus to the Economic growth through well defined / planned economic policies which are in contravention of the prescribed economic Policies for Growth. Two examples today are China and USA. In USA, the government went ahead providing stimulus in the form of Moral Support to Industries, Benign Policies, Low interest rates and heavy borrowing from the other countries to Sustain the Economic Growth. This was mainly supported by Dollar which is the most accepted currency in the world coupled with the fact that a robust capital market which provided avenue for raising funds through various instruments not only domestically but also from outside US . The stimulus in US was given at the cost of general health of the Economy, which is very fragile, even today.
Whereas in the case of China, the stimulus for the Economy was provided through many ways and till today, the stimulus continues for a long period of time which is helping the Economy to show continuous good rate of growth. The following factors helped the Chinese Economy to sustain the growth rate even today.
1. Grand Vision. The Political Leadership decided that China should become an Industrial power and in line with the Population rank, they should develop their industries and take them to number one in the field they were operating. With that in Mind, the plans drawn for Economic Development and Infrastructure Development were in line with the objectives of reaching number one position in many segments of the industry.
2. Export Led Strategy. The policy makers identified that to become an industrial power they had to go for cost leadership strategy which would help to achieve a very high level of exports, since the strategy would create a competitive position which would be difficult for other countries to challenge. The cost leadership was pursued with great vigour and the country achieved the cost leadership position in the areas where they became leaders in exports. This helped to increase the size of manufacturing in the overall economy as well as earn Forex in a big way. The exports were subsidized at every level of value chain in the production system.
3. Risky Lending practices. Since most of the enterprises in China belonged to Government and earlier government owned enterprises, the loans were disbursed violating the prudent practices on lending. At one point in time, in this century, the NPA in Chinese Banking system was close to 50%. Since there was no pressure for the enterprises to worry about financial management, they pursued the production targets with increased focus. The focus of corporates were on production than on any other function.
4. Low Interest Rates. The government has a full control on the banking system and ensured that the loans are available at very competitive rates. The interest constituted a very small portion of the overall cost of products. The competitive interest rates in the economy helped Large, Medium and Small Enterprises to avail loans at attractive rates. This has substituted the minimal participation of stock markets in the Chinese Economy. Only in the last few years, the stock markets have become vibrant and Investment in equity by retail investors is showing signs of promise.
5. Inflation. Since there was a good control on Interest rates and the domestic economy was under the full control of the government, Inflation levels were at reasonable levels. The government had taken concerted efforts to control inflation .At CPI level , only in 2007, the it was above 4 at 4.8 and at 5.9 in 2008 but it came down to – 0.7% in 2009.
6. Fixed Exchange rate. For a long period of time, the government pegged its currency to the dollar and even after deciding that they should move towards realistic rates, the currency was allowed to appreciate marginally, only for a few months and again a strategy of pegging the currency to the dollar policy was pursued. This helped the country to retain its competitiveness in exports.
7. Large inflow of funds. Since the economy had shown a good promise for growth and the currency fluctuation was minimized, the country was able to attract large amount of foreign funds. Despite, large inflow of foreign funds, the enterprises were certain about exchange rates and its minimal impact on financial performance . Hence they concentrated more on the core business than on managing finance.
8. Control on Cost of other resources. There is a system of permission for workers to work in one city , thereby restricting the free movement of labour across the cities/towns. Further, the workers are made to work long hours with clearly defined targets for production. Since government transferred the companies to private sector, in most cases, the transfer price of enterprises to private sector was at very low rates which resulted in lower Depreciation and other infrastructure costs.
9. Good Implementation. After planning large projects, the best practices in project implementation was adopted and mammoth projects were completed as per the plans and achievement of physical targets took precedence over the financial aspects.
10. Political System. All the above was possible , since the entire country is run like a Corporate Enterprise. Those who reach the central leadership should have demonstrated their skills at lower levels of administration ,where they were able to demonstrate their competence and management skills. When investment takes place at a provincial level, the provincial authority has the full powers to give licenses and the levels of decision making was less and the uncertainity in implementation of projects was minimized. This will be very difficult in a democratic and plural society where the views of all the stakeholders are to be taken before making decisions.
There are concerns that the Chinese growth will come to a stop and the bubble will burst. This is not likely to happen, since China is a large country and still many regions are in the process of development and many people are under poverty line. The growth in China would be sustained through the increase in Domestic consumption even if the Trade position deteriorates with developed countries but likely to be off set by trade with developing countries ( where China has started increasing the engagement with these countries in a big way). China is likely to continue the Stimulus it is providing for many more years and it has developed the required resources to support this growth. But the extent and nature of stimulus provided will vary from what was observed in the past.
It will be a challenge for Democratic countries and countries with higher level of transparency to adopt all the practices like in China but at least the aspects relating to Management of the Economy including Management of Interest rates, Inflation, Currency Management and Project Planning and Management could be strengthened to achieve higher levels of Economic Growth.
Saturday, February 27, 2010
Views on the Budget F11
Budget – F11
The budget is a well balanced one and was much better than the expectations of Various stake holders from the society. Under the circumstances, when the government has to play a major role in sustaining the growth rate of the economy and need to manage its finances to ensure the stability of the economy, steps need to be taken to shore up the finances of the government. The budget has targeted an increase of 18% in tax revenue after registering a maringal growth over 2008 – 2009. The major contributor to the increase in revenue is customs duties Rs.30,000 cr after a loss of Rs.11400 cr in the previous year , Excise duties Rs.30,000 cr after a loss of Rs.6613 cr last year , increase in service tax of Rs.10000 cr and an increase in corporation tax Rs.46,000 cr with an assumption that the corporation tax will grow by 18%. The budget plans for reduction in Income tax of Rs.4400 cr over the previous year. Total tax revenue is expected to increase by Rs.113,000 cr.
They had factored in better compliance in assuming increase in taxes. They are establishing two more tax processing centres apart from Bangalore. IT is planned to be used effectively. A target has to be set to increase the number of non salaried individual assesses by 5% from the present levels.
The growth is expected to continue and the thrust for growth will come from the increased purchasing power of individuals since the tax rates were reduced, continued focus on rural development through NRGEA, increased emphasis on infrastructure , institutional strengthening efforts in the agricultural sector, increased ability of the PSU banks / RRBs to disburse more finance through recapitalization of banks supported by new licenses for Banks and Bank Branch Linceses. The stimulus for exports were continued , small and medium sector were given increased focus and housing development was given its place in the growth momentum.
Rs.1,48,118 cr is expected to be raised from non tax sources, an increase of Rs.35000 cr(3G) over the previous year. Rs.40,000 cr from privatization, Rs.35,000 cr from 3 G auction. It was assumed that dividends received would be lower by Rs.600 cr over FY 10 at Rs.51309 cr. A target increase of 18% could be looked at from Dividends. There was no mention about the use of land bank . Adopting a strategy of capitalizing the land bank with government / government undertakings and PSU’s can provide additional revenue. There has to be an increased focus on raising resources from non conventional sources and a target of at least Rs.25000 cr could be looked at for revenue from Land, in the form of sale/lease/dividends. The revenue from Non tax sources could be increased substantially , if a decision is taken to dilute stake in more profit making PSU’s coupled with sale of land in sick PSUs and declaring dividends. This would help to meet the fiscal deficit targets without much pressure on government finances. The expenditure was planned to be managed well and there should a continuous monitoring of expenses by the government in relation to the budget.
The main contributor to the increase in excise and customs duty are duties on petrol and diesel. Since fuel constitutes about 15% weightage in the index,. Inflation will increase immediately by about 0.5% from the present levels. This will have a cascading effect on all the industries. Hence the cooperation with state governments to bring down the prices of food items should be given increased focus and the infation rate has to be brought down closer to 5% level.
The budget is a well balanced one and was much better than the expectations of Various stake holders from the society. Under the circumstances, when the government has to play a major role in sustaining the growth rate of the economy and need to manage its finances to ensure the stability of the economy, steps need to be taken to shore up the finances of the government. The budget has targeted an increase of 18% in tax revenue after registering a maringal growth over 2008 – 2009. The major contributor to the increase in revenue is customs duties Rs.30,000 cr after a loss of Rs.11400 cr in the previous year , Excise duties Rs.30,000 cr after a loss of Rs.6613 cr last year , increase in service tax of Rs.10000 cr and an increase in corporation tax Rs.46,000 cr with an assumption that the corporation tax will grow by 18%. The budget plans for reduction in Income tax of Rs.4400 cr over the previous year. Total tax revenue is expected to increase by Rs.113,000 cr.
They had factored in better compliance in assuming increase in taxes. They are establishing two more tax processing centres apart from Bangalore. IT is planned to be used effectively. A target has to be set to increase the number of non salaried individual assesses by 5% from the present levels.
The growth is expected to continue and the thrust for growth will come from the increased purchasing power of individuals since the tax rates were reduced, continued focus on rural development through NRGEA, increased emphasis on infrastructure , institutional strengthening efforts in the agricultural sector, increased ability of the PSU banks / RRBs to disburse more finance through recapitalization of banks supported by new licenses for Banks and Bank Branch Linceses. The stimulus for exports were continued , small and medium sector were given increased focus and housing development was given its place in the growth momentum.
Rs.1,48,118 cr is expected to be raised from non tax sources, an increase of Rs.35000 cr(3G) over the previous year. Rs.40,000 cr from privatization, Rs.35,000 cr from 3 G auction. It was assumed that dividends received would be lower by Rs.600 cr over FY 10 at Rs.51309 cr. A target increase of 18% could be looked at from Dividends. There was no mention about the use of land bank . Adopting a strategy of capitalizing the land bank with government / government undertakings and PSU’s can provide additional revenue. There has to be an increased focus on raising resources from non conventional sources and a target of at least Rs.25000 cr could be looked at for revenue from Land, in the form of sale/lease/dividends. The revenue from Non tax sources could be increased substantially , if a decision is taken to dilute stake in more profit making PSU’s coupled with sale of land in sick PSUs and declaring dividends. This would help to meet the fiscal deficit targets without much pressure on government finances. The expenditure was planned to be managed well and there should a continuous monitoring of expenses by the government in relation to the budget.
The main contributor to the increase in excise and customs duty are duties on petrol and diesel. Since fuel constitutes about 15% weightage in the index,. Inflation will increase immediately by about 0.5% from the present levels. This will have a cascading effect on all the industries. Hence the cooperation with state governments to bring down the prices of food items should be given increased focus and the infation rate has to be brought down closer to 5% level.
Sunday, February 7, 2010
Union Budget – F11
Union Budget – F11
The Stimulus by the government has helped to a achieve higher level of economic growth. But inflation could have been kept at a lower level by better demand supply management. The recent initiative by the Central government to co-orindate with the state governments to bring balance in the demand supply is in the right direction.
GDP growth in the first quarter this year was at 6.1%, second quarter was at 7.9% and in third it is likely to be in the range of 8.2 – 8.5%. If we can end the year with a quarter growth of 8.5 – 9.5%, the overall growth for the year could be closer to 8% for the whole year.
Despite greenshoots emerging, there are sporadic reporting of failures of economic systems in a few countries which have an impact on the world Economy. Since India’s economy is more integrated with the global economy than in the past , withdrawal of stimulus has to be handled with caution.
The Budget should focus on growth and there is a need to continue the stimulus and the government should continue the stimulus in sectors which have a greater impact on consumption, investment and higher multiplier effect on the Economy.
The withdrawal should be gradual and we have to prepare a phased plan for withdrawal. We have to identify economic indicators with the target for key indicators and once the target is reached then the corresponding stimulus could be withdrawn. The targets will have corresponding action plans for Finance ministry, Commerce Ministry, RBI and SEBI. A road map could be drawn up for withdrawal of stimulus on the above lines.
The concern regarding the budget deficit could be addressed through raising funds through unconventional measures including Capitalising the land bank of the government and government enterprises in a big way. China had resorted to this strategy in a big way at the State and Central levels in the last year which helped the government to provide a very big stimulus.
The Stimulus by the government has helped to a achieve higher level of economic growth. But inflation could have been kept at a lower level by better demand supply management. The recent initiative by the Central government to co-orindate with the state governments to bring balance in the demand supply is in the right direction.
GDP growth in the first quarter this year was at 6.1%, second quarter was at 7.9% and in third it is likely to be in the range of 8.2 – 8.5%. If we can end the year with a quarter growth of 8.5 – 9.5%, the overall growth for the year could be closer to 8% for the whole year.
Despite greenshoots emerging, there are sporadic reporting of failures of economic systems in a few countries which have an impact on the world Economy. Since India’s economy is more integrated with the global economy than in the past , withdrawal of stimulus has to be handled with caution.
The Budget should focus on growth and there is a need to continue the stimulus and the government should continue the stimulus in sectors which have a greater impact on consumption, investment and higher multiplier effect on the Economy.
The withdrawal should be gradual and we have to prepare a phased plan for withdrawal. We have to identify economic indicators with the target for key indicators and once the target is reached then the corresponding stimulus could be withdrawn. The targets will have corresponding action plans for Finance ministry, Commerce Ministry, RBI and SEBI. A road map could be drawn up for withdrawal of stimulus on the above lines.
The concern regarding the budget deficit could be addressed through raising funds through unconventional measures including Capitalising the land bank of the government and government enterprises in a big way. China had resorted to this strategy in a big way at the State and Central levels in the last year which helped the government to provide a very big stimulus.
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