India’s strategic win at UNSC

Inspite of slight tense situation created by our strategic partner Britain, India is able to convince United Nations Security Council that the situation in Kashmir is normal and there is no need to assume any panic.

(Source courtesy : Wikimedia Commons)

Nearly after 54 years, UNSC has Kashmir as a topic of discussion. This meeting was called up by permanent member China and its ally Pakistan claiming havoc in Kashmir after revoking article 370 in Jammu and Kashmir. Pakistan has earlier wrote a formal letter to UNSC for a meeting on Kashmir. UNSC declined an open formal meeting but agreed for a meeting close doors where all the details are not to be made public.

With China backing its move to bring in Kashmir as an international dispute, Pakistan made a final attempt to get US buy-in on Friday. However US, Britain, France and Russia has ruled in favour of India saying Kashmir remains a bilateral issue between India and Pakistan and this cannot be ‘internationalized’.

An anxious moment raised when Britain agreed China’s proposal that an informal outcome to be notified through UNSC president. This could mean that a statement be issued on Kashmir’s situation by UNSC. However eventually 4 out of 5 permanent UN members denied any intervention on Kashmir. India has been appraising the circumstances and on going normal situation to 5 permanent and 10 non permanent members from the day article 370 was revoked

Its getting intense for India to deal Maldives situation

China is looking to establish an ocean observatory station in one of the island that is near to India cost line. It is not only a mere observer, but is capable of military application and submarine base. Though China sources denied, it was reported a week ago that 11 Chinese warships sailed towards Maldives in spite of current emergency situation in Maldives. This proves the fact that the ocean station is a threat to India’s interests in Indian ocean.

Meanwhile, despite multiple requests from Nasheed, the opposition leader in Maldives, India is currently in helpless situation to proceed with Military intervention. Any aggression from India’s side in spite of global support, would bring direct conflict with China in current situation.

YameenModi
(image courtesy : maldivestimes.com)

Maldives is the second country to sign the Free Trade Agreement with China in December 2017, after Pakistan. Maldives now supports for Maritime Silk Route as part of the Belt and Road Initiative of China. Adding with the new observatory station planned, it would be difficult for India to dare anything in Maldives that is strategically located in Indian Ocean.

It was a great thought to have all 10 heads of Asian heads on single dais to witness the Republic day parade, but standing by what we say and protect the people of our neighborhood during crisis situation is really a litmus test to our integrity. While we partially succeeded in case of Doklam in Bhutan, Maldives situation is relatively tougher situation to deal with.

India’s stand on emergency in Maldives

With unrest in Maldives, it is vital for India to wait cautiously and take a strategic decision.

Yameen, current leader has declared sudden emergency in Maldives, with fear of loosing government elections. This started creating ripples eventually leading to unrest between China and India. The current government under Yameen has become a close ally to Chinese for past few years. China has been investing big time in Maldives with the moto to gain its military presence in Indian Ocean.

india china flag
(image courtesy: indiatvnews.com)

The opposition leader Mohamed Nasheed who has been in good terms with India, when in power until 2012 is pitching his voice against the sudden emergency. Other opposition leaders like Abdul Gayoom were also arrested and there is increasing revolt. Opposition is now requesting India for its military intervention like in 1988. Any step towards bringing its  military, India would lead itself to a direct conflict with China

China on other side has two extreme choices to make. Either support current government or support democracy with proper elections. Supporting government with current emergency situation would only give advantage to countries like India to bring in their Military in opposition and loosing its global support. On other side, supporting democracy and facilitating elections could also risk dethroning the current government from power and indirectly helping India to gain its control back.

Key events impacting Economies in 2018

Today’s article in ET by Reshmi Khurana and Probal Dasgupta has given a clear insight on key political events that could affect global as well as India’s economy.

With his unconventional leadership style, Trump is redefining US relationship with rest of world, especially with Russia, China and West Asia.

Analysts say, China is all set to fill in any leadership gap that US could not, in global politics. For instance, China is expected to oppose Trump’s move to decertify Presidents Obama’s nuclear deal with Iran in 2015. With support of EU and Russia, this could strongly help represent China’s position as global power.

United Nations Headquarters
(image courtesy: flicker.com)

US and Russia has different positions in West Asia. US stand to declare Jerusalem as Israel capital has raised tensions. China has already announced it intent to play a role in resolving the dispute, signally itself as a global peace broker. With Russia supporting China here, this would bring both these two countries politically closer. Not sure yet on US sanctions on Russia, but this would also have impact on Russia’s undersea Nordstream pipeline between Germany and Russia. This in turn might strangle the ties between US and EU.

With US supporting Japan and India w.r.t trade in India Ocean region, where China is strategically to start dominate the region, the global relations among these key super power countries would define the economies significantly.

North Korea would be another key flashpoint in 2018. With countries 70th anniversary and South Korea hosting Winter Olympics any aggression on either side would have high impact globally.

Other key event happening is Brexit. While there are still couple of years to see its full affect, things like reduced immigration etc have started showing the impact. With reduced availability of technicians and skilled labour from other EU areas, the labour cost is increasing in UK.

In Summary, 2018 looks to be a crucial year in defining the global economies

(feel free to provide your views on kalyan.salehundam@yahoo.com)

India’s current foreign relations

The dynamics in global relationships are changing frequently. Some have been favourable to India and others are posing challenges for its growth.

India ensured a clear approach on West Asia policy. A combination of investment, defense and security, counter terrorism was understood with Gulf Arabs and Iran. This is done tactfully, while maintaining a a special relationship with Israel. The crown prince of UAE, will be India’s chief guest for Republic Day 2017. Maintaining a deeper relationship with Gulf countries should help further weaken their current unhealthy relation with Pakistan
Leaders

(image courtesy: Indianexpress.com)

Africa is India’s maritime neighbour separated by Indian Ocean. With huge resources and opportunities evolving, African countries would be definitely a strategic and economic partner to India.

With active participation in Naval exercises and making this years Nuclear deal, India has made a very progress in strengthen the relationship with Japan. It also started passive support to other countries along with Japan in keeping tab on China’s aggression in south China Sea.

Key nations has always been curious about Trump’s strategy. Well, with India it seems to be have positive till now. His ‘remarks’ till now placed India in a comfort zone, also considering his remarks for Pakistan and China. The only thing that is bothering till now is on the visa’s and its impact on IT industry. Experts has given mixed opinions on it, but India need not worry on it immediately.

Relations between Russia and India peaked in October this year after the annual summit held in Goa. Russia has been a reliable partner in defense, nuclear energy. However instances like Russia’s strategies supporting Taliban to check Islamic State would hamper the relationship.

It is quite evident that Pakistan has been one of the biggest threats for India in the area of terrorism. While India can make certain aggressive steps like in Indus Water Treaty, it will have implications. With new man as GHQ, India can wait and see on how Pakistan’s next step.

China has been India’s hindrances for economic growth. At the same time we rely on China on many areas, how India deals with China in 2017 will determine its own global rise.

With alliances and relationships getting complicated globally , India should be cautious choosing its strategies.

(Analysed from Indrani Bagchi, TOI, Stanly John from TheHindu,NILOVA ROY CHAUDHURY, RIR sudanvisiondaily.com)

German Chancellor’s visit to India

German Chancellor, Angela Merkel lands in India this week for a three day trip. Needless to say, Chancellor Merkel’s visit is of great significance. She is not only accompanied by her elite cabinet ministers, but also by a large delegation of business leaders.

With 21 billion $ worth of trade, Germany is the top trading partner from EU. And there is still scope for expansion. Today there are around 1,700 German companies in India, creating 4 lakh jobs. Germany needs IT skills and India needs technology, to create more jobs. The major agenda that India is seeking is in manufacturing, infrastructure, vocational training and renewable energy. We, India is a fast growing economy with 7+ growth rate and we need a large amount of foreign investment. With the new policies, thanks to our new government, our Indian economy is opening up as never before. The recent visits by our PM to various nations highlights this. There is a significant relaxation in caps on FDI in key sectors.

India-Germany(Picture courtesy : indiatoday.intoday.in)

Infrastructure:
With Metro rail projects, Smart cities, Speed railways taking into shape it is vital that we have the support of German technology. German companies like Siemens are there from Decades. Companies like Deutsche Bahn can help us in developing high sped corridors. It is only about how well we reform and utilize their expertise.

Manufacturing sector:
The ‘Make in India’ providing huge potential, India is keen to parter in manufacturing sector. Indian government is driving hard to on the ease of doing business. German companies that are already make in India have brought their global business networks and advanced technologies.

Vocational Training:
Vocational training is used to prepare for a certain trade. It is all the training needed for a certain job especially Auto repair, plumbing etc. Germany is eager to provide its expertise in modernisation of the apprenticeship system and supporting in Small and medium enterprises. (http://thekalyan.com/2014/12/26/small-and-medium-enterprises-smes-are-key/)

Renewable energy:
Germany sees an opportunity to partner with India in development of solar power on rooftops in cities in India. Forecasts show that India plans to add 175GW of renewable energy in the next seven years. (our non renewable energy is 195GW for only 2014-15). German cooperation on in this aspect will be a great asset.

Clean Ganga Project:
It is also an opportunity for India if we can get the expertise of German’s having cleaned up Rhine River that was in the same state as Ganga now.

In conclusion this visit is an opportunity for India in many economic aspects.

(Analyzed from dw.com, financial express, yahoo news Indiatoday)

Global Slow Down – Silver Lining for India!!

While most of the articles in the news from the last week are on global slow down of economies including India, many say there is a sliver lining, as far as Indian economy is considered.

Some facts before we proceed: India has lost only 3.7% of total loss of $12 Trillion as compared to 41% China’s 21% US’s and 14% Hong Kong’s. While most of us know the root of this crisis is China, looking this from another angle many say it is an opportunity for India to benefit from the China crisis.

Global meltdown

How is India better than China?

  • Cost of doing business in China is going up as compared to in India
  • GDP growth trends for India shows an increment and a decrement for China.
  • There is little room for China to absorb money from public investments, where as India can absorb trillions just through infra
  • China’s working population is aging, where as India youth population is increasing
  • Domestic products and services consumption % in India is much higher than compared to China. This acts as a cushion for India’s economy during global crisis.
  • China’s debt has gone to alarming levels of 101% (from 2007-14) as compared to 5% of India’s. This gives India a better chance to take more debt for growth and development

Silver lining:

With the above scenarios foreign investors are looking up for India. They want to invest and produce in India. For years, India is fuelled by its domestic demand (except the IT sector), unlike where China sells its products abroad. India has good scope for attracting global investors during this time.

Factors favoring India:

Another key point to note here as compared to our counter parts – Brazil, Russia and South Africa, India has ample international reserves and is not highly dependent on foreign capital to fund imports.

India is also currently benefiting from lower oil prices, as 75% of its consumption is imported. Foreign exchange reserves are increased by 13% and inflation is halved from last year and commodity prices are declining. Current account deficit is narrowed to very large extent.

While there are negative areas like rupee depreciation that impacts FII inflow, Falling exports, high bank NPA’s (Non performing Asset: Once the borrower has failed to make interest 90 days the loan he took, it is considered to be a non-performing asset. This impacts banks because their major income is loan)

So what should India do?

Undertake the important structural reforms and ease the domestic bottlenecks.

Simultaneously US investors are looking at reforms in Patent laws, retro taxes etc. and India in total taxation etc.

  • Patent laws:
    • India has right to revoke a patent of any multinational company if it proves it’s only a minor modification of existing drug. Many multinational organizations claim that the new version though minor should be patented.
    • India currently has law that can grant a ‘compulsory license’ to any drug organization to produce a third party patented drug in order to make it affordable to 1.2 billion populations. Many multi nationals are not encouraging this as they loose profits.
  • Retro taxes: Amendment in the Income tax and made effective from a back date, especially for foreign transitions. This might be fatal for some multinational organizations that did not pay tax earlier as per the law that time, but will have to pay the tax now.
  • Totalization agreement: Indian professional working in US, pay their Social security taxes but they will not be able to reap that benefit as many of them don’t work for 10 years or retire in US. India is working with US in getting these taxes directly paid to PF fund in India so that Indians get the benefit once they return India.

In conclusion:

In summary it is right time for India to make right reforms and get the benefit out of global slow that that helps India economically dominate the next two decades in the way China dominated the last two.

-Data analysed from ET, NDTV, The Wall Street Journal, the guardian, ictsd.org and change.org

“Extra” charge for Viber and Skype?

Recently Airtel has increased the tariff for some of the internet services like Viber and Skype. After a couple of days later, they have reverted the rates back. The analogy given in Economic times on 30th Dec is quite interesting. How would you feel if the Toll booth guy on the highway stops your Maruti Swift and says, “Sorry, we have decided to charge more for Maruti Swifts, can you pay double the rate now for the toll?” How would you feel?

network (image taken from it watchdogs.com)

Lets see what Net Neutrality is: ISPs and governments need to treat all data equally, irrespective of service provided by the data, type of user – because Internet is a public resource. A logical question from Airtel’ perspective can be right: how internet is a public resource?, how about my cost of fibre, towers, etc. An ISP has every right to recover those costs of investment, but there is a thin line of difference between right to determine the price and right to differentiate the traffic. As he built the highway, a toll booth guy can demand a toll price for a car, but he don’t have right to differentiate price among cars as all cars occupies same space on road.

Similarly, fibre network is different and Internet is different. An ISP to convert fibre cables to internet infrastructure, it needs internet resources like IP addresses that are public property. When you have access to public property, you cannot determine the usage of it on your terms, or for your business interests. Innovation is a right path to navigate through the new challenges in market instead of raising the charges for Viber and Skype calls in a lazy way. It is not really appreciated a kind of good “business strategy”

The above article is analyzed from ET, 30th Dec

Overcome immediate hurdles in IT industry

With the new economic activities in US, there has been a growth in jobs in US, at the same time more work offshored to India. Also the positive sentiment is shown in Britain and Europe that in turn helps India in getting more work. A global economic recovery is good news for those who are relying on the IT budgets. Even the Software product development companies are also benefited with this trend. These all looks like a positive trend in the IT industry.

IT-industry-bcbay

(image taken from trackworks website)

But, there are two main reasons that are having a negative impact on the growth of IT industry in a short term. It is majorly on the decreased margins or the increased costs with relatively less increase in topline.

  • The annual pay raise to its employees
  • Higher visa costs for the employees in the customer locations

Solution: The way the margins can be increased is by:

  • Automation of routine tasks, so that increases in staff productivity will stay ahead of costs
  • Indian IT companies should gain confidence of the clients’ core activities such as research and development areas so that those core activities can also be offshored, increasing the work that can be offshored.

There is a very possibility that Indian IT companies can cope up with the margins, but as mentioned, it may be difficult to have it done in the first quarter.

India should focus on Micro, small and medium enterprises now

Meeting the employment needs of crores of young people is one of the major responsibility of the government now. As discussed in my previous post http://thekalyan.com/2014/05/24/jobs-are-growing-but-not-in-all-sectors/ major set of workforce are in need of employment is in manufacturing, construction, tourism sectors etc. Micro, small and medium enterprises (MSMEs) have a great potential to meet this requirement. Next to agriculture, this sector, contributes to 8% of the overall GDP. Most of the people in this sector are entrepreneurs

smallKalyan: (image taken from rediff) for the article

While the government is helping this sector through financial, technological and marketing assistance, assistance in conducting tool rooms, there are still some bottlenecks. Key problems are related to labour laws, taxation, market uncertainty and majorly the skill level of the workforce.

  • For instance, MSMEs have multiple, stringent labour laws to follow. This means they have to employ additional staff with financial and legal expertise to comply with the laws that adds to their costs.
  • MSME’s face tough competition. As they don’t have any assured information on regular supply of raw materials for production. So they will be vulnerable to price fluctuations.
  • Inadequately trained staff also has an impact on the MSME’s – with the limitation pertaining to infrastructure from government training institutes.

 

What needs to be done?

  • Provide a careful analysis of markets and projections keeping global trends in mind. Like that in agriculture sector, dedicated radio and TV programs like Krishi Darshan can be broadcasted for MSMEs.
  • More Subsidies, tax concessions.
  • Service MSME’s require less finance than that of manufacturing, but can generate quick jobs. So concentrating more on it.