India became a trillion dollar economy on Wednesday the 25th of April 2007 when the Indian rupee appreciated to below the '41 mark' against the dollar. India thus became only the 12th country in the world to achieve the feat. Well that is the good news. The captains of Industry are ecstatic and rightly too.With the economy growing at 9 percent, India watchers had been predicting this milestone by the end of the the current financial year but it was achieved much faster, helped along with the rising rupee."It signals the maturing of the Indian economy and indicates that most of its contributing engines are beginning to to fire," said one of the leading lights of the Indian industry. Does it?
Every time the Indian Economy achieves a major macro-economic milestone my thoughts turn to the poor Indian. It would have been great if the trillion dollar Indian economy could put a smile on the faces of all the billion Indians. It really would be a great day for the Indians if the Trillion dollars could mean that every Indian could take home at least a $1000 per annum. Is that too much to ask? In the Information age? In India? It should not be. After all India is only the twelfth country to go past the trillion dollar mark and is counted among the top ten economies of the world. India's foreign currency reserves have gone beyond $200 billion mark, the stock market will soon provide the the next milestone for everyone to cheer when the market capitalization goes past the $1 trillion mark from the current $944 billion. By 2020 India's GDP would have quadrupled and shouldn't that make every Indian hopeful of earning a thousand dollars. The sad thing is that all the mega macro level news will not translate into good news for the common man. It is the responsibility of the government, leaders of industry and educationists to reach out to the people and encourage relevant education and free enterprise and employment. The banks ought to back micro-finance companies in their effort to help people set up their tiny little businesses. People who are trying to lift themselves out of the quagmire of poverty businesses instead of just financing consumerist activities. There is nothing wrong with financing someone who wants to buy an air conditioner, a digital camera, a microwave, a dvd player, a laptop, a TV,a car or a motorcycle but my contention is simple, that a young Indian who wants a loan to start a business should not hesitate walking into a bank or approach a micro-finance company and ask for financial assistance. The banks and the financial institutions should be able to entertain the entrepreneur's application for financial assistance without looking down upon him just because he can't speak fluent English or that his clothes are not from designer stores.
India could certainly become a land of genuine billion smiles if the government, and the training institutes could develop the entrepreneur in every young Indian. The distribution of wealth will take care of itself if parents and educational institutes stop selling 'the lie' to future generations who have grown up thinking that the only way to financial success is getting a good degree and going out to work for some one else. It is time we told them the truth. And the truth is develop relevant skills and go out and shape your own destiny. Have the guts to work for your self and to start your own business. The young generation, which is India's finest asset and most vital engine, has the vigor and the energy to turn the trillion dollar economy into a land of a billion smiles.
Saturday, April 28, 2007
Thursday, April 26, 2007
Total Revolution
Like Steven D. Levitt, the author of that amazing book Freakonomics believes that if you have the right data and you ask the right questions, the modern world is not impenetrable despite a surfeit of obfuscation, complication and downright deceit. It maybe even more intriguing than we think. 'All it takes is a new way of looking'. One great thing for analysts and commentators whose area of interest is the American economy is that economists and researchers keep churning out a lot of authentic data to analyze and comment upon and figure out which way the world is headed. People interested in the India story are not so lucky. The data available is either obsolete or sketchy. Though things are changing, they are not changing fast enough.
Disparity in the distribution of wealth, especially in a democracy should interest everyone who is involved in wealth creation; which should mean practically everyone. While a democratic setup provides unlimited opportunities for wealth creation, unmatched in any other system, there is something disturbing about great extremes of wealth and poverty.
Let us look at some data in the world's richest democracy - USA and the world's largest democracy - India. According to some unsettling data about incomes in America released by economists Emmanauel Saez of the University of California and Thomas Picketty of the Paris School of Economics, 44% of pretax income was received by the richest 10% (14 million people) of the population. Which means that 90% of the population shared the balance 56% of the pretax income. 6.3% takes home 33% of the total income. More astonishing is the fact that 1% of the population received a whopping 17% of the pretax income in 2005. Average annual income of this top 1% population(1.4 million) was $371,000 was more than 10 times the per capita income of an average American. The income disparity between the richest 10% of the American population and the poorest 10% is even more glaring. The average income of the top 10% income earners is more than 24 times the average income of the poorest 10%. The causes of this inequality are far from clear and a lot of work needs to be done. The data clearly shows that income distribution in the world's richest democracy is far from optimal yet their poor do not live a dog's life. They have social security and opportunity to acquire skills to become economically viable. if they do not it is more out of choice and not out of the absence of infrastructure or opportunity.
Looking at a similar data about the world's largest democracy the picture is not so pretty. Though India is soon slated to be the fourth most prosperous nation in the world, the chasm between the rich and the poor is so glaring that you could be living in two different worlds at the same time. Though the data on India is neither so current nor so correct but it points at facts which are symptomatic of many future trends.
Going by the World Bank statistics, the richest 10% of India's population is more than 7 times as rich as the poorest 10 percent. Even if this is assumed to be correct, this is a lot inequality. But considering that 35 percent of India's population is living on less than one US dollar a day (or around Rs. 42), the rich poor divide is far more alarming than the World Bank calculations suggest.
So what is the point of the whole exercise?
The point is that while India is being heralded as one of the major players in the world economy, we have more than 350 million people trying to survive on less than a dollar a day. How is their life in any way elevating or even be called human?
The challenge is to to replace the 'cram education system' with an infrastructure for skill development which will provide every Indian the opportunity to acquire proper skills to become economically productive.
We sometimes end up drawing wrong conclusions from the available data. First thing that needs to be understood is that, the rich getting richer are not the cause of the poor getting poorer. This should be evident from the fact that the gap between the richest 10 percent in the USA take home 24 times the amount the poorest 10 percent earn against the 7 times in India. Yet the the condition of the poorest class in India verges on the bestial. Though the trend towards a concentration of higher percentage wealth in smaller and smaller percentage of the population is quite evident, it does not mean that the number in absolute terms would shrink as a result. But it is also very evident that unless people are encouraged to acquire skills and life changing relevant education, they will be frustrated and marginalized in the 21st century.
Secondly, the poverty of the poor reflects low skills and lack of education. The best way to reverse the trend towards greater economic equality is for the government and the people to focus on creating a more relevant HRD system and move away from the mere monotony of pedagogy in our schools. India cannot play the leading role in the world economy in the information age without bringing about massive changes in the education system which is at best the industrial age version of the colonial education system. Otherwise the huge human resource of this 'young' nation will go waste. There is lots to be done and done fast. The government could take the lead but there is a need for as some thing like the 'Total Revolution' in which social organizations, NGOs, eminent individuals and industrial houses should put in their best effort and make India a real power where not only the macro figures of development are impressive but its benefits trickle down to the poorest of the poor by way of opportunity not alms.
Disparity in the distribution of wealth, especially in a democracy should interest everyone who is involved in wealth creation; which should mean practically everyone. While a democratic setup provides unlimited opportunities for wealth creation, unmatched in any other system, there is something disturbing about great extremes of wealth and poverty.
Let us look at some data in the world's richest democracy - USA and the world's largest democracy - India. According to some unsettling data about incomes in America released by economists Emmanauel Saez of the University of California and Thomas Picketty of the Paris School of Economics, 44% of pretax income was received by the richest 10% (14 million people) of the population. Which means that 90% of the population shared the balance 56% of the pretax income. 6.3% takes home 33% of the total income. More astonishing is the fact that 1% of the population received a whopping 17% of the pretax income in 2005. Average annual income of this top 1% population(1.4 million) was $371,000 was more than 10 times the per capita income of an average American. The income disparity between the richest 10% of the American population and the poorest 10% is even more glaring. The average income of the top 10% income earners is more than 24 times the average income of the poorest 10%. The causes of this inequality are far from clear and a lot of work needs to be done. The data clearly shows that income distribution in the world's richest democracy is far from optimal yet their poor do not live a dog's life. They have social security and opportunity to acquire skills to become economically viable. if they do not it is more out of choice and not out of the absence of infrastructure or opportunity.
Looking at a similar data about the world's largest democracy the picture is not so pretty. Though India is soon slated to be the fourth most prosperous nation in the world, the chasm between the rich and the poor is so glaring that you could be living in two different worlds at the same time. Though the data on India is neither so current nor so correct but it points at facts which are symptomatic of many future trends.
Going by the World Bank statistics, the richest 10% of India's population is more than 7 times as rich as the poorest 10 percent. Even if this is assumed to be correct, this is a lot inequality. But considering that 35 percent of India's population is living on less than one US dollar a day (or around Rs. 42), the rich poor divide is far more alarming than the World Bank calculations suggest.
So what is the point of the whole exercise?
The point is that while India is being heralded as one of the major players in the world economy, we have more than 350 million people trying to survive on less than a dollar a day. How is their life in any way elevating or even be called human?
The challenge is to to replace the 'cram education system' with an infrastructure for skill development which will provide every Indian the opportunity to acquire proper skills to become economically productive.
We sometimes end up drawing wrong conclusions from the available data. First thing that needs to be understood is that, the rich getting richer are not the cause of the poor getting poorer. This should be evident from the fact that the gap between the richest 10 percent in the USA take home 24 times the amount the poorest 10 percent earn against the 7 times in India. Yet the the condition of the poorest class in India verges on the bestial. Though the trend towards a concentration of higher percentage wealth in smaller and smaller percentage of the population is quite evident, it does not mean that the number in absolute terms would shrink as a result. But it is also very evident that unless people are encouraged to acquire skills and life changing relevant education, they will be frustrated and marginalized in the 21st century.
Secondly, the poverty of the poor reflects low skills and lack of education. The best way to reverse the trend towards greater economic equality is for the government and the people to focus on creating a more relevant HRD system and move away from the mere monotony of pedagogy in our schools. India cannot play the leading role in the world economy in the information age without bringing about massive changes in the education system which is at best the industrial age version of the colonial education system. Otherwise the huge human resource of this 'young' nation will go waste. There is lots to be done and done fast. The government could take the lead but there is a need for as some thing like the 'Total Revolution' in which social organizations, NGOs, eminent individuals and industrial houses should put in their best effort and make India a real power where not only the macro figures of development are impressive but its benefits trickle down to the poorest of the poor by way of opportunity not alms.
Friday, April 20, 2007
Are You Ready For The India Growth Story?
Going by the trends and the way Indian economy is shaping up, India is all set to become the engine of burgeoning global economy. It's per capita income is expected to quadruple by 2020. As India and China, move to the center stage of world economy with Brazil and Russia, it is time for all of us, I feel, to think at the micro level. It worries me no end to think about my own life ten to fifteen years from now. Maybe it should worry you too. It is time to look at some hard facts, and answer some relevant questions like what will my income be in 2020? Will my income be four times what it is today? Even if my income quadruples in the next decade, will my family be able to live comfortably on that income or do I need to do better than quadrupling my income? Do I have a strategy in place to enhance my income or am I just going to hope and pray? Will I have a better lifestyle or will the high rate of inflation insure that I just about manage to maintain my current standard (Ha!) of living?As the India growth story unveils itself what will be my role in it? Will I just eke out a living or will I make a life?
According to very conservative projections there will be more than 100 million people with an annual income of over Rs. 630,000 or $15,000. That is a great Macro level news and I am sure a lot of companies will be trying to assess the size of the Indian market and concertizing plans and strategies to take advantage of such a huge consumer market. On a more micro and personal level two questions come to mind.
First of all, will I be one of them?
And second of all, will a mere Rs. 50,000 ($1250) a month be enough to live comfortably in 2020?
The first question is easy to answer. The fact that you are reading this, chances are, you will be making that much or maybe even twice that much. The second question tougher to answer and sends a shiver down the spine just thinking about the future. What kind of life will I have earning just Rs. 50,000 in 2020, when that is the kind of money I need today to live a life which is just about comfortable. 'Miserable', 'sad', 'tough', 'dreary', 'forlorn', 'scary'...are some of the words that come to mind that will describe living on that princely sum in 2020.
So what could be the minimum target income and what should be the time frame to achieve it?
Our aim should be to earn at least $30,000 i.e. Rs. 126,00,00 or at least
Rs. 100,000 a month and not just Rs. 50,000 a month within the next five years, not ten. As the great Indian juggernaut economy shifts into the next gear, lot of people will be caught napping and be marginalized. That is the bad news.
Then again the good news is, you and I could wake up to our financial needs and reality, and take effective steps to, not only survive, but thrive in the next decade.
What can we do?
The number one thing that we can do is that we need to take stock of where we are today and also decide where we want to be in the next five years. Assuming, I earn Rs. 15,000 a month today what are my chances of making Rs. 100,000 doing what I am doing, in the next five years. If I am are 100% sure (and one needs to be 100% sure or risk being marginalized), I could continue doing what I am doing. Speaking for my self I am sure to quadruple my income and be earning more than Rs.100,000 monthly in the next two years because I recently changed direction so that my goals and the vehicle to achieve it are in sync. Same will probably hold true for you. If what you are doing will not take you where you want to go, you too need to change your vehicle. One definition of insanity, is to continue doing what you have been doing and expect different results. If you are not sure about achieving your goals in the next five years, you need to change your vehicle or your direction or both. Only by changing direction can you change you destination and you destiny.
So what needs to be done and done now is:
Write your goals: What you want to be. What you want to do and what you want to have.
Select the right vehicle to achieve those goal.
Choose the right people to associate with and become part of a winning team.
Learn new skills to cope with the changing environment.
Learn to work smart.Get training.
To conclude, the growing Indian economy will create opportunities for people who keep themselves abreast with the changing scenario.The bad news is that it will marginalize many talented people if they do not change with the times. The good news is that you and I need not be among them. In fact you could be the agent of change and help many people who are in touch with you to keep their head above water. You need to be aware and benefit from the India growth story. Are you ready for it.
According to very conservative projections there will be more than 100 million people with an annual income of over Rs. 630,000 or $15,000. That is a great Macro level news and I am sure a lot of companies will be trying to assess the size of the Indian market and concertizing plans and strategies to take advantage of such a huge consumer market. On a more micro and personal level two questions come to mind.
First of all, will I be one of them?
And second of all, will a mere Rs. 50,000 ($1250) a month be enough to live comfortably in 2020?
The first question is easy to answer. The fact that you are reading this, chances are, you will be making that much or maybe even twice that much. The second question tougher to answer and sends a shiver down the spine just thinking about the future. What kind of life will I have earning just Rs. 50,000 in 2020, when that is the kind of money I need today to live a life which is just about comfortable. 'Miserable', 'sad', 'tough', 'dreary', 'forlorn', 'scary'...are some of the words that come to mind that will describe living on that princely sum in 2020.
So what could be the minimum target income and what should be the time frame to achieve it?
Our aim should be to earn at least $30,000 i.e. Rs. 126,00,00 or at least
Rs. 100,000 a month and not just Rs. 50,000 a month within the next five years, not ten. As the great Indian juggernaut economy shifts into the next gear, lot of people will be caught napping and be marginalized. That is the bad news.
Then again the good news is, you and I could wake up to our financial needs and reality, and take effective steps to, not only survive, but thrive in the next decade.
What can we do?
The number one thing that we can do is that we need to take stock of where we are today and also decide where we want to be in the next five years. Assuming, I earn Rs. 15,000 a month today what are my chances of making Rs. 100,000 doing what I am doing, in the next five years. If I am are 100% sure (and one needs to be 100% sure or risk being marginalized), I could continue doing what I am doing. Speaking for my self I am sure to quadruple my income and be earning more than Rs.100,000 monthly in the next two years because I recently changed direction so that my goals and the vehicle to achieve it are in sync. Same will probably hold true for you. If what you are doing will not take you where you want to go, you too need to change your vehicle. One definition of insanity, is to continue doing what you have been doing and expect different results. If you are not sure about achieving your goals in the next five years, you need to change your vehicle or your direction or both. Only by changing direction can you change you destination and you destiny.
So what needs to be done and done now is:
Write your goals: What you want to be. What you want to do and what you want to have.
Select the right vehicle to achieve those goal.
Choose the right people to associate with and become part of a winning team.
Learn new skills to cope with the changing environment.
Learn to work smart.Get training.
To conclude, the growing Indian economy will create opportunities for people who keep themselves abreast with the changing scenario.The bad news is that it will marginalize many talented people if they do not change with the times. The good news is that you and I need not be among them. In fact you could be the agent of change and help many people who are in touch with you to keep their head above water. You need to be aware and benefit from the India growth story. Are you ready for it.
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