The dollar downing

 

No seriously, how much lower will the dollar go? It's gone lower beyond Mallika's neckline and even Rakhi Sawant's décolletage seems nun-like proper in comparison to this plunge. Is that how low it goes or will it plunge further?

78 per cent of Americans say that the economy is getting worse, according to a recent Gallup report. So we poor third world types better be ready for some tough times because the greenback today looks increasingly like what the Bangladeshi taka looked like a few years ago. It's safe then to say, "Dollar to do takey ka nahi."

Why if Karzai is given a free hand, the Afghani will be equal to the dollar. The ISI can then trade their ill-gotten dollars with the Afghani.

And those wealthy Indians, who stashed away dollars without Chidambaram's knowledge, weep copious tears because the taxman is having the last laugh. Your dollars are not worth the Samsonite suitcase it is packed away in.

Try traveling anywhere in Europe with dollars instead of Euros. You are met with stony looks at currency exchange counters. One gets the same look that Arab sheikhs got changing dinars few months after 9/11.

Recently in Moscow, I tried paying my hotel bill in dollars. I was politely and firmly ticked off. "No dollars here, or anywhere sir." I presume she meant anywhere in Russia, but she would probably not be too off the mark if she meant the world minus the US and England. Oh yes in England the Bureau de Change (as you would have gathered I hate paying commission fees) accept the dollar as if accepting 'shagun' from a relative. The US is their relative from across the pond, you see.

Once the oil barrel become a $100 and more, Americans will know what it feels like to be Indians, who hesitate to order a double iced, skimmed venti latte at Starbucks wondering how many nimbu paanis you could have bought with those Godforsaken dollars. With the rupee growing stronger there are more Indian billionaires than before we are told. K P Singh of DLF replaced Azim Premji in some billionaire lists. More power to our real estate maharajahs. They are the true blue blooded types in the new millennium.

Now, how about a Sahara Mall or a DLF Plaza in Texas? Right in the middle of Dubya land? The Texan product, George Bush, has brought the dollar where it is today. He just might take the Rupee to new heights. Of course he will welcome us Indians, after all he is our best bet, right Mr Prime Minister?

 

Courtesy: Economic Times

Coz that's where the Money is!

When legendary robber Willie Sutton was asked why he only robbed banks, his answer was rather simple: “Because that’s where the money is”. Investors follow a similar logic on the financial marketplace. They flock towards assets with the strongest growth characteristics, particularly during the later stages of a bull market when growth is in short supply.

Emerging markets have turned out to be the biggest beneficiaries of the Federal Reserve’s rate cut two weeks ago even though the primary objective of the US central bank’s action was to stabilize the US financial markets and limit the negative macroeconomic follow-through from the credit crunch. Within the emerging market complex too, markets with faster growing economies such as China and India recorded outsized gains despite the higher valuations already assigned to stocks in those countries.

This behavioral pattern is consistent with past cycles when any increase in global liquidity following a crisis headed more towards asset classes exhibiting relative strength rather than in the direction of weak performers. After all, most developing countries did not need any monetary help as their economies continue to grow at a rapid clip even in the face of a US slowdown. It is precisely such solid growth credentials that make emerging markets even more appealing for global investors who know it’s difficult to reinvigorate a weak asset class at this late a stage of the economic cycle.

The global economy has followed a remarkably uniform path over the past fifty years. Typically, a new economic cycle gets underway at the start of each decade and the rising growth tide initially lifts all the boats. Midway through the decade, central banks begin tightening monetary policy in order to pre-empt any inflation breakout. Higher interest rates always lead to financial turmoil in some part of the system.

Central banks then begin to adopt an easing bias, as the priority shifts to avoiding a wider crisis especially when inflation is usually not a major issue as yet. This sets the stage for a bubble in the few asset classes unaffected by the crisis as they were never in need of extra liquidity. By the end of the decade, the whole cycle begins to unwind with inflation ending being a more general problem as productivity gains diminish, leading to more concerted central bank action.

Japan in the 1980s and the US in the 1990s were winners of the late cycle boom. The scene is being set for emerging markets to be the mania of this decade. For the first time since the mid-1990s, emerging markets are now trading at the same valuation as developed markets. The price-to-earnings, or P/E, ratio based on one-year forward earnings is currently at 14 for both the asset classes. What most analysts tend to forget is that before the series of crises broke out in emerging markets in the mid-’90s, starting with the Mexican peso devaluation in December 1994, emerging markets used to trade at a premium to developed markets.

At the peak of their relative performance versus developed markets in September 1994, emerging markets were trading at a P/E multiple of 22— a 25% premium. The thinking back then was that emerging markets deserved to trade at a higher valuation given their stronger growth attributes. However, the disappointing earnings growth profile of companies in developing countries — due to their lack of focus on profitability and poor corporate governance — led to a substantial de-rating. Money fled to the US in a massive way later that decade with earnings growth exploding of US companies on the back of a tech-driven boom.

It’s remarkable that despite a more than a four-fold jump in emerging market indices over the past five years it is only now that emerging markets are trading at parity with developed markets in valuation terms. Earnings growth has been the main driver of returns for emerging markets but now it seems investors are once again gaining the confidence to pay a higher multiple for the asset class.

By the time this cycle ends, it’s likely that emerging markets will trade at a considerable premium. The power of P/E expansion is illustrated by the fact that if emerging markets get back to their 1994 P/E ratio of 22 it would translate into another 60% gain for the asset class. In addition, there will obviously be some earnings growth and even currency appreciation for the dollar investor.

P/E expansion is one of the most difficult concepts for financial analysts to comprehend. Many intangible factors drive this ratio, ranging from long-term growth and inflation expectations to just market sentiment. What history suggests is that as the breadth of a global economic expansion begins to narrow during the second half of a decade, investors tend to concentrate their bets in the few remaining growth areas.

Little wonder, capital flows to emerging markets have begun to accelerate following the credit crisis in the US. The challenge will be when inflation begins to rear its ugly head in the US or China — the main suppliers of global liquidity. It is important to understand that the Fed is currently able to respond to the credit crunch and cut interest rates because inflation is well behaved. In China, meanwhile, inflation is turning out to be a bit of a problem. However, the Chinese authorities have so far only taken incremental steps to tighten policy as they view food price inflation to be a non-monetary phenomenon and inflation minus food is rather tame.

Emerging markets are currently enjoying the best of both worlds: growth dynamics remain strong led by China while liquidity is abundant as the Fed reacts to weak US growth. To prevent a bubble, central banks in emerging markets will need to de-link their monetary policy from the US. But with inflation not yet a major concern in many developing economies and China reluctant to let its currency appreciate in a meaningful way, central banks are in no hurry to engage in any major regime shift. It’s no surprise then that global investors are piling into emerging markets, as that’s where the money is.

Blue Shirt With A White Collar

Yuppies have been one of the central characters of the well-chronicled "India Shining" story. No account of the country's economic surge would be complete without glowing references to record salary increments, unheard of perks and a massive consumer spend fuelled by the emergence of the rich twenty something professional. The brightest, smartest, wealthiest and the youngest of footloose Indian executives – mostly living in big cities and swanky offices – hog all the limelight and make it to glossy magazine covers. We've been swamped by heady accounts of freshly minted Bschool grad and IITians striking it rich or of compulsive IT and BPO job hoppers who manage to nearly double their salary with every move.

But in reality, white-collar workers or those in supervisory, non-manual jobs are very different from the popular mediahyped imagery. Contrary to the stereotypes, most of the white-collar employees are over 35, and have put in almost 12 years in the profession. And anybody who spends at least five years in a job won't qualify as a job hopper. Half of the whitecollar workers are plain graduates drawing an average monthly salary of Rs 13,000. Around 70 per cent belong to single-income households and an equally big number of them come from non-metro cities.

Just when you may have decided to switch off on this strange breed, here's what might sound familiar – 8 out of 10 want to change job in the next six months - salary being the biggest grouse.

For the world, white-collar workers in India have a glamorised face often referenced to signal the surging fortunes of a nation on the rise. Dominant themes around fat salaries, multiplying job offers and global work environment for the jet-setting lot provide easy and dazzling imageries of a changing India.

In reality, the world of executives is changing – though not as fast and as dramatic. What's the real face of white-collar workers? Where and how do they livework ? What do they aspire for? Has the job-hopping bug hit all? Is salary 'The Factor'? The Corporate Dossier-Juxt-Consult, an online research arm of Indicus Analytics, conducted one of the largest studies to understand and unravel white-collar workers in India. With 16,500 respondents, covering 4,700 companies in 31 cities, the study has been designed to represent 160 million urban Indians.

They aren't as glossy as often perceived. The survey reveals a face that's middle-aged, conventional, stable, mostly graduates with a majority (8 out of 10) employed in the private sector. With 68 per cent living in non-metro cities and close to 46 per cent drawing a monthly salary of less than Rs 13,000, "their white collars appear greasy – not starched," says Sanjay Tiwari, director, JuxtConsult. Only one in eight are very well off having more than Rs 50,000 monthly income.

But that's a face that's changing dramaticall . In the next seven years, India is expected to add around eight million new workers every year – one in every four new worker in the world will come from India. This will happen at a time when the government's role is increasingly shrinking both as a job creator and attitude influencer in India's job market as private sector outpaces them. "Stable, 9-to-5 job with defined predictable career-paths - everything that defined a government job is getting redefined," says economist Laveesh Bhandari who also heads Indicus Analytics.

These shifting tendencies are already beginning to show.

While in one hand average white-collar workers (surveyed) have spent close to five years in their last job, a high 80 per cent say they will be open to or may consider a job change in the next six months and one in four aspire for ESOPs. The stability-loyalty on the surface is being stirred by a dramatic questioning of norms on the inside. If nothing, this shows a growing willingness to experiment across age, hierarchy and sectors. White-collar workers will change in many other ways. The entry-level age – of 23 years that the survey reveals – too is coming down with the younger generation. It is expected to settle around 20 years, experts say.

So far clerical jobs of accountants, general management, administration dominated the entire pool comprising 33 per cent of the total. Emerging but critical functions of the future like IT, HR, designing comprised barely 7 per cent, 3 per cent and 5 per cent respectively. As the services-led economy grows, some of these new upcoming functions will gain importance even as some of the old clerical jobs get eliminated due to automation and standardisation of processes. "Changing nature of economy will demand a new definition of white-collar workers," says Manish Sabharwal, chairman, TeamLease.

Communication skills, basic computer literacy – softer skills will become critical for gaining entry into this class. Madras University has made it mandatory for postgraduates to clear a course on soft skills. CII in partnership with BPO firms is helping train 250 teachers in Chennai for the course. After the pilots, the course will be made mandatory for the undergraduates as well.

There's another potential area of change in the SME segment. Forty per cent of the white-collar workers are from SMEs where productivity and efficiency levels are poor. The survey reveals that on an average, one senior manager manages only six white-collar workers, the ratio getting better with size. "I see that already changing," says B Santhanam, chairman, national committee (HR), CII.

Absence of processes and lack of standardisation means higher level of human intervention required – this is what explains the poor manager-worker ratio. Smaller companies, growing rapidly, are actively looking at automation and outsourcing of non-core functions to improve efficiency levels. "This is the only way they can handle growth, attrition and employee aspirations, they realise," says Santhanam.

Overall, only 30 per cent of the whitecollar worker households come from multiple income households (read working spouse). This dips further in the government and PSUs to 20 per cent of the families as against 33 per cent in the private . Further, most under Rs 20,000 income households are single income and the likelihood of it being multiple income rises as one moves up the economic ladder. Both the drivers for a working spouse – better incomes and more private sector jobs – will only strengthen in future.

But what doesn't seem to be changing is the geographical skew in jobs available for white-collar workers. So far it's the government and PSUs who have been the biggest creator of these jobs in the north and east whereas private sector has dominated the south and west India (66 per cent of the jobs). As the government vacates its role in larger number of economic sectors and private sector jobs outpaces them, this skew will intensify in future . "You will see lot of political reaction on issues like reservation etc going forward ," says Abheek Barua, chief economist , HDFC Bank.

Simply because a large chunk of new workers will come from the northern and eastern part of the country where fertility rates are still higher whereas more jobs will be created in the west and south. But remember, a large part of India's workforce will remain in the self-employed segment, warns Ajit Ranade, group chief economist, Aditya Birla Group. Poorer BIMARU states like UP and Bihar, with weak educational infrastructure and even weaker job prospects, are adding more workers.

The transition from blue to white will be a long and ardous journey.

Courtesy: Economic Times

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The sweet and sour Indian story from Viswanathan Anand

(The author is world chess champion, Viswanathan Anand)

In 2007, as we complete 60 years of Independence as Indians, we seem to have got a new sense of identity. Not just the kind of identity that comes from having Aloo Tikki burgers or Bollywood pop but a true sense of being a country. As we add to an impressive list of billionaires and top class corporate, Indians are extremely proud of seeing the Indian Tricolor fly high.

For me personally, becoming World No. 1 meant that it was not a first for me but a first for my country. Recently I was with the mayor of a picturesque German town. She mentioned that they were now keen to have Indian tourists rather than Japanese. This was an eye-opener. She said Indians came, stayed at the best hotels and spent on fine food and wine. They were not keen on mass tourism in crowded buses. This is a paradigm shift. India is now seen not as a country with a future but a country where the purse strings are beginning to open and the purse itself is bulging. As the Sensex zooms to new levels, Indians silently feel that the country is prospering. Images of patriotism are now new symbols of prosperity.

All this makes me feel very proud to be part of a country that is rich in its past and more likely in the future.

Recently a Spanish magazine ran an article on the state of Indian women. To say the least it was highly derogatory and general in its assumption. My wife called the editor to complain about the lack of sensitivity and the general assumptions made to call all Indian women subservient and modern-day slaves. It was most saddening to see that some countries perceive us as an impoverished society. The fact that we have elected women as President and Prime Minister, CEOs, traveled to space didn't cut. The answer was coldly that "but most of your women don't have a chance".

Although I hate to admit it, female infanticide still exists in certain states. It is altering the gender ratio in some states that are among our more prosperous states. This is what is disturbing -- economic wealth alone is not an indicator of social progress. We have women at two ends at the spectrum fighting against odds to achieve. For some, the odds are just life and death.

As we power ourselves to be the knowledge powerhouse of the world, we are proud to bring computers to the farmer. I have myself seen such touching examples of women using the stone they use to roll chapattis as mouse pads. Micro credit has been a boon to many farmers and big corporate have come up with novel ideas of giving the farmer a better deal. But being a highly fragmented country you see some farmers self-immolating themselves for the lack of the very same privileges some of their fortunate brothers now seem to use as normal business practices.

I have travelled to many countries and met Indians in countries like Iceland and Estonia. The one striking feature is we blend in very easily. We are able to assimilate other cultures and never impose our beliefs on others. Somehow we are able to leave that baggage at home. When I hear of untouchability being an issue or caste issues being raised it rattles this equilibrium.

It takes just one tale like that to mar 100 perfect images of the Indian story. It then becomes the story we get identified with. When someone asks me which caste I belong to or does my caste mean I go to heaven, I, honestly, have to say I don't think of it. My main aim in life is that I play chess. They always find that answer irritating or rather un-mystic. But somewhere they have been given to believe that that is what India is.

There are two perceptions of India. One, of the people who have interacted with India from the economic side, have worked with Indians or travelled on business and they generally have a fairly positive one. The others get their perceptions from reading general articles. Most articles are fairly complimentary when they talk about culture, colors or customs. But sometimes dowry, female infanticide or caste violence will raise its ugly head. There are foreigners who have been to India and have been mesmerized by the experience. There are some who have gone and the only thing they seemed to have noticed are the cows and poverty. In some western countries you do notice similar things but somehow I find it difficult to tell a person that "in your country you know, I hate the way the trains are".

We now seem to shop the same way as our American cousins and truffles and foie gras are something you buy in your local delicatessen. But you look closer. These brightly lit stores need generators to battle the unstable electricity grid that is reeling under the weight of our consumption. The water has to be specially brought and the roads feel like one roller coaster journey until you arrive at the cool Indian mall. We need to go beyond the shop window and actually look at how to improve basic utilities. Not just in cities but also in rural areas. That is how progress is measured .Many of our people still having no access to drinking water. Roads need to exist and electricity at times becomes a luxury. I am not against consumerism. Brightly lit malls are also providing employment. I think each one of the Indians has a right to be a consumer not only for goods but also for utilities and we need at least a basic level of service. Aspiration and the need to live better will make Indians more competitive and drive the need to study more. Aspiration, albeit not for just luxuries, but also equality, education and emancipation.

I recently travelled on the Delhi metro. This was one of the best public transport services I have ever been on. I am one of those people who take my carbon emissions seriously. So I love using public transport if and when possible. The Delhi Metro is much cleaner and safer than its European avatars. We handle more crowds but still the people seemed to be almost proud of it and that dirtying it would be a crime. It is the same India with its same bureaucracy that made this possible.

Similarly certain roads in India are just world class. If we could do it in a few sectors why can't we be able to take it to the whole country?

It takes time, resources and initiative. We have the talent to make it happen.

All of us feel extremely proud when we watch the Incredible India campaign. But sometimes we need to look beyond the glossy picture and look at the real story. The real story in India is not always sweet or always sour. Taking both together may make it the best taste yet.

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