Slowdown! Recession and the cycle! 

Economic cycleThe science of economy is something which I don’t understand, seriously! Noble laureates give their theories, experts write essays, but an engineer like me understands only physics. Whatever goes up must come down! It is the theory of gravity. Sometimes it goes up slowly and comes down fast with a thud. Sometimes both speeds are similar. Economic growth goes up swiftly and comes down slowly sometimes. India has been lucky that it came out of the 2008 recession reasonably unscathed and bounced back for the last eight years to a decent growth rate of 6 to 8%.

Many factors lead to growth. Similarly, different factors slow down the economy. These factors are market sentiment, buying power, and so on; the Indian economy since independence did not show correct growth due to a parallel economy. The parallel economy, in the local language, is called Black Money. What is black money, and how does it get generated? Many businesses like construction, land dealings, trade pay each other by cash. Cash payment is made to avoid Income Tax. A part of business activity is never shown on paper. When there is “no business” there is no profit hence no Income Tax. The parallel economy also grew because of unprecedented corruption activity. Nobody takes bribe by cheque, so spending is also done in cash.

In some cases, corruption is in kind by gifting condos, high-end cars, or items which can be bought in cash. Such gifting is done in the name of non-earning spouse or a relative. In Many cases, such assets are “Benami” assets in the name of one’s sweepers, peons and drivers. In a recent interview, Mahindra & Mahindra Chairman Anand Mahindra said that the economy has been going through a process of ‘detoxification’. Since the negative impact of disruptions is now over, the economy is expected to see an upside in FY21, Bloomberg TV reported Chairman Mahindra as saying at an event in Davos, Switzerland. “The prime minister has been quite obsessed with the kind of growth he wants, and that is transparent, free of corruption” Mahindra also said. He also felt that the upcoming budget is expected to be watched closely by different quarters of the economy amid the slowdown.

The Indian economy is seeing a slowdown for some time now on account of a fall in consumption and demand. The government announced a slew of measures in the past few months to revive growth ranging from bank recapitalisation and boost in liquidity.

The perception right now is that government actions caused the slowdown. But on the other hand, if you are going to detox yourself, you always have a process of cleansing before you start recovering and running again. Demonetisation and GST were the part of disruptions that have now ended, and the economy is already seeing signs of life. From the next fiscal, India will surprise the world on the upside is the general market sentiment.

The International Monetary Fund (IMF) recently slashed the growth estimates for both the Indian and the global economy. The global growth is expected to reach 3.3 per cent in 2020, compared to 2.9 per cent in 2019, the slowest pace since the financial crisis a decade ago. The Washington-based international crisis lender revised downward India’s GDP growth projection to 4.8 per cent for FY20 and 5.8 per cent for FY21. “India’s domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth,” the IMF report said.

Detoxification had to be done. It has not eliminated black money. But the reports say that it is reduced to some degree. The government is relentlessly after the businesses and businessmen who have cheated their customers and banks. People like Modi and Mallya are in jail in Britain. Other business people like Sahara Subrata Roy, D S Kulkarni, Wadhawan are in prison. Unitech projects have been taken over by the government to give homes to 21000 people like you and me. The authorities did not have the guts to detoxify the banking system in olden days. The detoxification process has started bringing out huge NPA’s (non-performing assets) of many banks. These NPA’s were created with the help of bank employees sometimes. But many times, the businessmen cheated the banks. Under the garb of hidden NPA’s our economy was “doing well”. When the cleansing act began a few years back, the loan sanctioning processes became a little tougher. The result of more scrutiny was that credit availability came down. When the available credit comes down, business activity slows down. It is a spiral that any economy dreads. But system correction was a must.

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Growth any any country cannot be perpetually high. As the base increases rate of growth is bound to come down.

On one side, the automotive industry has slowed down, but there are reasons like availability of Ola’s and Uber’s of this world. But there is a surprise that the SUV introduced by KIA is selling like hotcakes. There is going to be one more hurdle here; the government is pushing for Electric Cars or initially more efficient IC Engine Hybrid cars. These cars will be more expensive than current IC Engine cars; the young generation is now changing their thought process. They don’t buy cars, but prefer Uber and Ola; they rent homes instead of buying homes. India has now become number two in the world behind China for the Smart Phone market. Spending ways are changing.

I am happy about this downturn for another reason. Gita Gopinath from IMF explained that the Indian recession has caused a 0.1 % reduction in the growth rate in the world economy. It indicates that India is not a small cog in the world economic wheel. At the same time, she has also said that the worst for the Indian economy is over, and it will start the upward movement in growth rate from this year 2020! The statement will disturb some people because they hoped that bad times would continue. Each group has his/her agenda! Some for political reasons and others for TRP reasons! The lousy news is THE news!

Indian economic experts had made similar predictions and statements! But we believe in someone who sits in cool climes; even if the person is desi, it is okay! Old habits die hard!

I have observed an interesting thing in international diplomacy. Turkey and Malaysia had no business to poke their nose in the internal affairs of India. They made some statements which were not necessary. When India protested, they continued in the same vein expecting the docile Indian response of yester years. But they must have got a shock of their life. India kicked them where it really hurts. India had ordered one ship worth US $2.2/ billions, on Turkey; it was put on hold. For Malaysia, India was the most significant customer of refined palm oil. A few hints here and there, the purchase pattern changed within a few months. Indian traders switched over to Indonesian palm oil. Malaysia was shocked, and they have no option but to accept it. Their prime minister accepted that Malaysia is too small to retaliate. They are trying to offer some sweet deals to India. But India is ignoring them.

Friends, in the economy of any country and for that matter world, there are always cycles of growth and downturn. A downturn can be because of market sentiments, inflation and sometimes the combination of two, stagflation. The experts of every country find ways that suit their economy. Japan for years is not doing great because of their efficient methods of working. The Japanese markets are too small for some of their giants like Toyota, Honda, Docomo. They have no option but to export and open plants in different countries. The German case is also like Japan because its economy is entirely dependent on the exports of superb engineering products. The economies of different countries are now changing from a global open market to the one which is suitable for own requirements. The US has become a leader of such self centered thoughts.

It is going to be a game of diplomacy where each country will look for ways which will be to their benefit only. Brexit is a latest classic example of this thought process. In each country, the opposition plays the political games of troubling the incumbent governments. Whichever is the government in any country, they can make mistakes, but they all put the interest of the country ahead of everything else.

For commoners like you and me, it is necessary to be remember that economic activity is a cyclic process. It goes down and then it bounces back; we need not worry about these issues.

 

 

 

 

Even Better India!

My previous blog was Better India! The blog got responses from people, and the subject has touched many hearts! My friend Ajit was very vocal and made strong pointsThese many comments induced me to write this blog, Even better India! 

https://panvalkarpramod.wordpress.com/2019/11/18/better-india/ 

Most have agreed about self-discipline, and road discipline and rule-breaking by ordinary people. But the comments also suggested that if specific actions are taken against a group of people, we can have “Even Better India”! Who are these people? Which is this group of people who need to be controlled? Politicians, Bankers, Rogue business persons? Or all these can be defined under one group, Goondas? Maybe this is too strong a word! People working in government have great opportunities to take bribes, but let me assure you it happens in the private sector too! Let me tell you that taking bribes has been happening even in my parent’s generation! I know it because my father was a police officer and retired as a DCP! Since he was an honest officer, after retirement, he did not have enough money to buy his own home too! Our family found a different solution for them. While I was in school, at some family friend’s house, I had accidentally seen a few bundles of hundred-rupee notes! He was a government official. So how do we start to make even a better India?  

Independent India started with people who had their needs barely covered, but there was only small higher middle class and wealthy class. Our country was in a euphoric mood, and the income tax slab at the top end was 97 %! We were in a socialist mood. There was general hate about wealthy people as if they were some aliens. Wealthy Kings and Royalty were expected, but there was dislike about rich people. At 97 % income tax rate tendency to hide profits and not showing correct income started becoming a norm. My personal view is that I would have also done the same thing had I been a taxpayer in those days. Over a period, the government understood the folly of such high taxation plus need to get linked with the global systemTax % over a period became more realistic and with global links business activity in India started increasing. IT industry suddenly put many Indians in the worldwide workforce. The number of people in the middle class and higher middle class started growing.  

Now we have millionaires and billionaires in the working class. Along with this change, businesspeople started becoming superrich. Income tax compliance increased, but people still started hiding their income, the most standard method was to create a group of shell companies, thanks to the creativity of chartered accountantsSome well-known global accounting firms also started helping businesspersons by suggesting the Swiss Banks and Cayman island routes. Some super-rich became roving Casanovas and had lifestyle which created many Nonperforming assets. Homes in London, Villas in Cannes, spending summer months in St Moritz became the lifestyle of these people.  

When there were so many super-rich people, politicians could not be far behind. The nexus became stronger. The lawmakers tweaked the laws for their friends, and the quid pro quo was not far awayWhen money levels reached thousands of crores, the need for bank loans increased, with this cheating the banks also increased. Over some time, friendly managers, general managers and directors of the banks started the quid pro quo acts with the rich! You help me; I will “help” you!  

Some of the super-rich entered the political arena, along with these people some harmful elements from the society also joined the bandwagon, including those with murder charges, started becoming netas and getting elected in Vidhan sabha and Lok SabhaWe all forget that theoretically, India is a great democracy with significant rules and laws to keep check on malpractices! The income tax departments, enforcement directorates, and other authorities were around but were kept dormant under pressure by politicians. These group of officials were “told” to ignore malpractices done by certain groups of businesses. Politicians thought that they were immune to such actions.  

But in recent years, the government is trying to ensure that the vigilance departments would start doing the job actively, without any influence from interested” people. The action created Mallyas, Modis and Kotharis. People who thought that they could never be caught have become official fugitives. Government has started action against shell companies, and three lac shell companies were forced to closeThe act of closing shell companies automatically brought out the trail of black money. Government has started acting against chartered accounting firms who were “guiding” people to hide the black money trail. A chartered accounting firm in Bangalore was guiding thousands of employees to “steal” money from Income Tax. All these people were made to pay correct tax, and it was easy for the department to locate who was guiding them. The authorities acted against this particular company too! 

The nexus between all these groups is so deep in the system that it is going to take time to bring them to books. Some political families, who were middle class twenty years back now have thousands of crores with them, without any specific known source of income. How is this happening? Will the government have the guts to act against such families? I think the government has shown courage already by taking action against individuals and families 

Supreme Court is also quite proactiveThey are actively pursuing cases like Sahara, DSK, Unitech, Amrapali and many others. The court has put many big shots in jail. They have been told, arrange to return people’s money if they wanted to come out of jail. Mallya, Modi, Kothari have been shamed as they are declared fugitives! They are living the life of fugitives in other countries. The courts, even in the UK, are making it very difficult for them to get bail. These folks ran away from India before they were declared offenders, so their exit from India and entry into the UK has been legal, so extradition has become a tough and longdrawn process.  Banks have also started correcting their errors. The NPA money to the tune of four lac crores has been recovered from defaulters 

One thing is sure that the system does not like non-corrupt officials and politicians. But some non-corrupt people have shown that one can work in the present corrupt environment. When the government started giving various subsidies based on Aadhar card links, many groups and individuals were upset. Some state governments are already acting on corrupt officials, but there is a long way to go!  

Making changes is not as easy as it looks, but again it is about the culture. The world over there is significant corruption in large business deals. But usually, it does not happen on day-to-day be basis like our policemen, anti-encroachment team taking hafta (speed money)! So, it comes back to the same issues what I wrote in the blog “Better India”! If the policeman on roads, clerks in the offices, peons sitting outside the boss’s cabin stop taking haftas, things will change.  

Government action on business people, politicians, and goondas is going to help create “Even better India”! But as Ajit had also mentioned in his comments that the general public is good; no, I don’t agree! All the big guns or goons whatever you want to call them, are being chased and are being taken to task; the same non-hafta culture and culture of self-discipline must filter down to the lowest common denominator!  

Actions need to be taken right across the board and not against only some groups! Combination of these two actions is going to make “Even Better India”!

 

Are you not proud of your nation?

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As usual, let me make a disclaimer! I don’t care which party is ruling our country! Whatever I am writing in this blog is apolitical! We were under the British rule for 150 years before the independence we got on the 15th of August in 1947! Thanks to strong personalities like Sardar Vallabh Bhai Patel, we became India or Bharat as we are known in the world todayOur national wealth was looted by the British under the garb of collecting taxestaking away raw materialBritish presence (and their final going away) did a few good things for India. We became one nation, we had railways, we had an established all-India administrative and police services.  

In Nehru era Public Sector units, Irrigation got significant importance. Indira Gandhi broke Pakistan into two, thereby correcting the problem created by the British by at least 50%! Kashmir issue resolution opportunity was lost; it could have been achieved in the Shimla Agreement. Indian population showed great maturity in overcoming Emergency, the black patch on the Indian Democracy! Jayprakash Narayan led the movement though he was old by that time.  

Next twenty years were tumultuous, but India somehow overcame the same, though we did not have strong leadership. India’s jumping the IT bandwagon successfully started the financial growth processAlong with fast economic growth, crony capitalism and corruption at different levels increased at breakneck speedCheating the government with shell companies was at peak and was used for money laundering.  

All the governments did a lot of good things in their times and bad things too! Then came the Modi Government in 2014 and looks like it will run till 2024! They have had their ups and downs. They have also done some good things and some bad things. From this angle, it is not much different than the previous governments.  

Along with fast economic growth, crony capitalism and corruption at different levels increased at breakneck speedCheating the government with shell companies was at peak and was used for money laundering and diverting funds. These issues created a need for strong actions.

There are specific actions taken by this government which were never considered by any other government before. These were essential for a mature democracy and were generally discussed previously with a glass of Chivas Regal. Nobody ever thought that it was possible in India. 

Yesterday, I shared a certificate displayed below with my friends. The reactions to the certificate were varied! “I have already done it” was message sent by many. Some people sent me a congratulatory messageMy friend Shrikant appreciated this very strongly, and that is what led me to write this blog. 

Certificate ofCommitement

He wrote an elaborate message which I am sharing verbatim!  

“What did you do? Please elaborate?? Such certificates are sent by IT/Vigilance department of Govt of India, to persons having an impeccable track record of regular tax payments & no offences registered, in Govt data tracker! Just a law-abiding citizen. I am also told this is an initiative to motivate/thank taxpayers while furthering the stated objective of putting a high premium on honesty. I have received two such certificates already. Many others also must have! 👍😊 

An individual or an organisation can go to the website https://pledge.cvc.nic.in/ and take this pledge if one desires so. When I went to the site, it also shared information that 85,86,062 individuals and 123,138 organisation have taken this pledge. In the discussion  on our WhatsApp group, somebody said, “Why do you need a certificate?”  

Then a thought came to my mind. We always ask the question what has my nation done for me? But should we not be asking the questionwhat have I done for my nation? I feel that the British have, along with many things, ensured that our pride for our nation was killed. Even today some people say, “We don’t deserve to run our nation. The British should be brought back to run it.”  

The current government has taken many actions in international diplomacy, where people listen when India talks! Now, do we not feel proud of the nation? One major historical correction by India of removing article 370 provisions for Kashmir got allround support in the world. Except for Pakistan’s all-weather friend China, all major countries have supported India. China too is looking at Pakistan from strategic and commercial point of view. Let Pakistan default on repayment to China then it will be interesting to see what China does!  

From the beginning of the 21st centurythe concept of media changed drastically. We started having TV news Superstars” who considered themselves knowledgeable in everything. They started behaving as if they were Gods of media; all others were treated by them as mere mortals. Sycophancy was at its best during this phase. Corruption, both material and moral, reached its peak. There formed a group of people who had jumped the free jaunts bandwagon. They would travel with ministers and the Prime Minister. They ended up giving sermons to others — Social Media like Facebook, Twitter, et al. added to this list. You and I were immaterial. 

Now this government has started the initiative of pledging integrity to the nation. It is like saluting when Jan Gan Man is sung or keeping your hand on your heart! I felt proud to take the formal oath; I felt proud of my nation. All through my life, I have always tried to avoid paying bribes for personal work or business. Sometimes I failed as I was not the final authority to take that decision; I was an advisor to some companies. But in my software and furnacerelated business, I have never paid a single Rupee bribe.  

Some of my friends were cynic about this drive. India has had a poor record as far integrity is concerned. Sometimes, we say God Promise; similarly, here we are saying “Nation Promise”! Till date, not even one per cent of people have taken the pledge mainly because many may not be aware of this initiative. When we say God Promise, do we break the promise? The same logic can be and should be applied to your nation. Assume that even 5% of people take this pledge, will it not make any change in India? Will you beak your new version of “God Promise”?  

What have to say to the cynics? For those who tried to make fun of the certificate, I shared, I will say in the endI can understand the doubters because things have not been as they should have been, so they feel that people will take the pledge but keep on doing what they have been doing! We are always going to have Naysayers who are fashionably called Liberals! Liberals group was not very much against government stuff as they were getting their foreign jaunts and were able to run Nalanda Vidyapeeth-just to give an example.  

Government has started a new portal for a portal http://www.pgportal.gov.in/ The portal is used as  Centralised Public Grievance Redressal Monitoring system 

Such an initiative has never been tried before.  

External affairs ministry under Sushma Swaraj was helping individuals stuck in foreign countries due to some issues. Mr Modi makes it a point to spend a day during Diwali with soldiers on the borders.  

I am not at all saying that it is hunkydory on all fronts. In many areas, issues and problems continue. To run a nation as big and as diverse as India is not going to be easy. On top of that, the British had looted our wealth for 150 years and made us a developing countrywhere famines were a part of life initially. But the green revolution, white revolution (Milk and Sugar) have taken place. In many areas like infrastructure, India is progressing fast. Metros are being built in many large cities. Let’s not forget ISRO!  

To me, the definition of naysayers is a bit different, besides the conventional oneThese are the people who after having toilets at home, want to go to the fields because they feel manly. It is those people who routinely break many laws and rules of public life, like parking, wrong side driving. These are the people who behave rudely with service providers like waiters; they cut corners at every possible opportunity in public lifeThese are the people who follow every general rule just after taking a fivehour flight from Mumbai to Singapore!  

About the friend who made fun of my statement about the certificate should go and ask the Sahara Boss, DSK Boss, Unitech Boss and many other such socalled big people if things are funnyMallya and Neerav Modi are enjoying their new status as fugitives and are forced to take shield behind the slow legal process in Britain. I am sure they have very high social status in the British page, three people!  

Income tax department sends certificates to people who pay personal Income Tax above specific value and appreciates them for being honest and proud citizens.  

Government is trying to push honesty culture, and if people find it funny, they must laugh loudly! If someone finds that it is a joke that I am proud of being an Indian, so be it! Some people have queer sense of humour!  

 

 

 

Cheats, Frauds or Failed Businesses!

Last few years have seen unprecedented situations in the construction business where tens of thousands of customers like you and me have been cheated by non-completion of the projects en mass and people are left in limbo. For many, their life’s savings have gone, on top of that, they have to pay the instalments against the loans taken by them.

Unitech, HDIL, DSK, Sahara, Amrapali group, Jaypee group are some of the companies who have cheated approximately 575000 flat owners all over India. Many cases may not have been reported for various reasons. But it is not only the builders who have done cheating. In other cases, the government and banks are cheated, the prime examples being Nirav Modi and Mallya. Recently it is found that in education “industry” too, this trend has started with staff not being paid their salaries for months together.

What is common in all these companies and individuals behind these affairs? After they started business initially, during rising markets, profits were enormous, and probably all of them felt that they had become Gods. Profits are never very high in the industry except in some IT and software related business and Narcotics! I know of an IT/Software global company who are absolute leaders in what they are doing. Even Intel is doing catchup game with them for the last 20 years. Their gross margins are 53%. So yes, the core group of people do buy Ferraris and have huge mansions. But they keep on working 24/7, 365 days. They also invest 30% of their profits every year in R & D. Recently one of their senior executives donated close to 40 million US dollars to start a Computer centre for teaching modern software technologies, at his alma mater. It was from his personal wealth.

All the cheats I am mentioning never bothered about such things and went beyond this, and started treating the companies as their private fiefdom. They diverted funds to personal accounts in hundreds of crores; additionally, they diverted money to different personally owned companies. So everything used at home, including their toilet papers, was spent by some company or the other.

The question that comes to mind is like the title of Count Leo Tolstoy story. “How much land  does a man need?” On the same lines, how much money does a family need? One crore, ten crores, hundred crores, a thousand crores? Maybe my assets are so small that I don’t understand what thousands of crores can do?

One thing is for sure, all of them become very arrogant and think that doors anywhere will open to them by saying “Open Sesame”! Probably they did open in specific corridors but current government in India, since 2014, is closing doors of their cells in jails. Or they have formally been declared fugitives. If this were to happen to me for such reasons, I would not be able to look at myself in the mirror! But not these people.

How do they operate? How did they manage to cheat? In many cases, with the help of someone in the banks, in some cases by defrauding the bank. First major cheat located was Harshad Mehta, 25 years back. In connivance with officers in Bank of Karad, he magically created FD of Rs. 200/ crores and rest we know what happened.  In some instances, senior bank management may have no business sense, or they were bought with some quid pro quo deals! Chanda Kochar of ICICI appears to be the case of quid pro deal where her husbands business was helped against sanctioning of massive loans in Videocon case. In the case of Neerav Modi, there was one middle-level officer who knew the systems well. He helped Modi by doing paperwork outside the computer system. Modi would take every time even higher loans to return previous loans and balance money for himself. I had read the news that he was also in the business of fake diamonds! So maybe his working capital requirement was not high!

In the recent classic case, owners of HDIL in Mumbai joined hands with Bank Management of PM Coop Bank. The bank management ended up giving HDIL loans which were 73% of total loans sanctioned by the bank to all customers. Luckily sleuths have located 1100 acres of land purchased in last few years which is now attached. If there is a delay from the government side to find out the misdeeds, the money trail becomes very weak, and it becomes hard to track assets that can be attached. On Rs.600/ crores turnover, the family had bought two small aeroplanes, a yacht, and huge bungalow in Alibag which was used to invite makers and shakers of Mumbai and Bollywood for parties; also maybe there were collateral benefits (not damages 🙂🙂)

It also appears that these “business people” forget the basic principles once they become big. DSK is one such case from Pune. He came up with the really hard way of doing business. From small projects, he graduated to create a big condo project of about six thousand condos. He handed over the homes in time and had become famous in Pune. After this, he wanted to make a township which was worth more than Rs. Ten thousand crores (the US $ 1.6 billion). He realised that he would fall short of funds big time. Hence, he started raising money. Because of his excellent track record, people in Maharashtra gave him the money, but many internal issues were going on, which came out too late. He used the caste card and convinced Maharashtrian brahmins to keep fixed deposits with him. The deposits were serviced well initially, but later it almost looked like a Ponzi scheme. He forgot the main principle that FD’s are to be returned back to people. Interests need to be paid regularly. He started treating FD’s like equity. I have been told by a friend, one of DSK’s vendor, that vendors were treated shabbily. Kulkarni’s wife would treat vendor’s like beggars. Financially, they were already in doldrums and rumours started spreading; these were not rumours, things had gone out of control. Thousands of customers were cheated; hundreds of fixed depositors were cheated. But obviously, there was no change in his and his family’s lifestyle, they had 46 high-end cars. Their almost ready condos were also found to be under lien! The whole family went into jail. But there is no relief as most of his assets are already under some claim or the other. With all this, there was hardly any progress in the 1.6 billion dollar project!

Ranbaxy is a classic case of cheats. The promoters sold their company to Dai Itchi of Japan. But Ranbaxy concealed and misrepresented many things and finally lost their case with due arbitration in Singapore. But biggest fraud was that one of the brothers could not pay his dues to Dai Itchi as he had diverted Rs. 6700/ crores (the US $1 billion) to a Guru! It is honestly beyond my understanding what these people are trying to do and why they do it!

So it brings me back to the same question? How much money does one need? All these so-called big shots are in jail. There are huge problems faced by courts and the government as the assets of most of them cannot be sold for one reason or the other. So who will complete these stalled projects? How will the people at least get their money back?

I must share one story I was told by someone about a well-known industrialist. He had bought a Rolls Royce; after a few months, he ordered another one. When the industrialist was asked, “Why the need for the second car so soon?” The industrialist replied, ” We had dinner at my home yesterday. A well-known politician said that the car looked superb. I jokingly said, take it if you want. The person drove away in my car at night”! Quid pro quo?

Can one really spend the amount of money that is diverted in such projects? So-called fame, bungalows, homes in foreign countries, planes, yachts, but finally jail! Is the urge to mingle with movers and shakers so strong that they want to “arrive” by any means? I presume that all these are not bad people, but they lost control over their thinking. They all started thinking that the setbacks can be overcome by borrowing more, most of the time, fraudulently! Some of them have fled from India, but the government is making strong efforts to bring them back to India.

The main reason for this situation is that they all started thinking that they had become Gods; all doors to where ever they went would open with their money and fame. But only doors that finally opened for them were jail doors.

Richie Rich!

RIchieRich

 

Richie Rich! This is my favourite comic character, in fact I still read these comics when I get a chance to read them. This kid is from a rich family and has everything that one may dream of. I used to wonder, how hard his family must have worked to reach this stage. Even today I dream of becoming Richie Rich but now there appear to be simpler ways than working hard, slogging all through life!

Nirav Modi has shown us the way of doing these things. This Modus Operandi had started with Harshad Mehta when he got a bogus Rs.200/ crores fixed deposit certificate. This was done in connivance with some bank official from Bank of Karad. The original FD certificate was for Rs.2/ crore and was conveniently changed the certificate to Rs.200/ crores. Using this fictitious certificate Mehta borrowed money from institutions, and rest as they say is history. When you borrow money against a Bank Deposit, it is assumed to be correct one in all respects and loan is simply given against the most liquid asset. Bank of Karad later went into liquidation. Why work  hard when you can cheat? A little jail term and some bad name is ok as long thousands of crores are available to you.

What we all have seen is that real money is created over a period a few generations of consistent efforts and hard work, sometimes a bit of luck also plays part. But during last 50 years, share markets, and IT companies with their very high  valuations and hence their skyrocketing share prices, have created billionaires. But in share markets real billionaires are far and in between. Not like those from IT industry. Classic case is Jeff Bezos, founder of Amazon. Even after 25 years in business, Amazon is constantly in loss, but keeps on doing business, gives deep discounts on products, Bezos is currently the richest person in the world. Some years back he bought iconic Washington Post for US $ 250 million , in all cash deal. These people have huge personal wealth, they have money to pump in business continuously, but their companies are loss making all the time! But at least they are not cheating banks and you and me!

In normal course, non- IT businesses do become bankrupt, fail but in IT industry failed companies on your CV make you special! Venture Capitalists pump more money in your next  ventures. Cheating happened to some extent, like in case of Enron. There are normal cheats but those of the size of Mallya’s and Modi’s were not many. There was a classic case of Chrysler corporation, who were given special loan by US Government. After a couple of years, this loan was repaid! The Chairman, Lee Iacocca at that time made a famous statement. “We borrow the money the old way, we repay it!” This one statement explained the way the business is done, world over, including India !

But with Modi’s and Mallya’s of this world, things are different. In recent years, there is a big list of people, from different sectors of industry like, power, construction and steel. These companies were given such huge loans that they have sucked the banks in trouble because they are all on the verge of bankruptcy. The beauty of current law in India is that the personal assets of the defaulting promoters cannot be attached. So, most are enjoying life as if nothing has happened.  A bankrupt company’s assets were being auctioned. The original promoters had failed to repay Rs.800/ crore. Original promoters took part in the auction and bought the same assets back at Rs.50/ crores; due to declaration of bankruptcy Rs.800/ crores went into thin air! A law was recently modified to stop people from cheating further.

In case of Modi, fraudulent LOU (Letter of undertaking) were issued by Punjab National Bank. Officers from the Bank issued these without any guarantees. This issue came up in January as the suspect officer had retired and when Modi needed fresh LOU’s, the new officer asked for guarantees. Modi’s people said that they had never given any guarantees before. Why they are being asked now? The whole Pandora’s box opened!

There are many checks and balances in the system but those who are supposed to check, break the rules, how to stop such frauds? It seems that the sizes of fraud are increasing in proportion to inflation and lifestyle. With whatever wealth they had,  before fraud, both Modi and Mallya could easily have lived with whatever lifestyle they wanted! But why do something fraudulent? What is enough money? It comes to basic question; how much land does a man need? What does one do with tens of thousands of crores of Rupees? There is a reverse trend started by Bill Gates who is encouraging the superrich to donate their assets because those assets by remaining under control of an individual or organization, remain idle. If these are donated and correctly used, world will be a better place to live.

In case of Modi he has been living in Europe most of the times, in case of Mallya also it is the same! At least at present they are lucky otherwise, when and if they are brought back to India, they will meet the same fate as Sahara Chief, Unitech boss, Jaypee team and now probably D S Kulkarni. What is the thinking of these people? All these people had done reasonably well in life, till they started doing wrong things. What were they trying to achieve? To become biggest in their field? These four groups have cheated individuals like you and me! Many of us have taken loans to buy flats, many have given life’s savings as FD’s after retirement!  Now there is no way for any new infusion of funds; income for these retired people have stopped, and capital is locked!

Let us hope that government of India, irrespective of party in power, continues the good work they are doing. They are ably supported by our courts by giving strongest possible indictment for bad deeds of the suave looking bad guys! But in discussions with some friends, I found that some people have sympathy for the these fraudulent people! They felt that it is just bad luck in their business cycle and people should support such business people. If you are supposed to be doing Rs.10,000/ crores of projects, and cannot raise Rs.50/ crores to repay depositors money, you do not deserve sympathy, they deserve law to take over and may free stay in Tihar jail or jail of your choice!