Defining Infrastructure a fresh

From the Childhood, We have heard the need of Bijli, Sadak aur Pani as the basic infrastructure of the society. Though we have not been able to provide these to our citizens completely.

But we need to move ahead. Digital connectivity, education and healthcare should be added to the basic needs.

We have seen the crisis during the current pandemic and we had to call PG aspirants in medical profession to fill the gap for manpower in healthcare sector.

We had to import basic raw materials for vaccination. Had we put enough stress on education, the situation would have been different.

We are attempting digital education, when a larger part of students have nil or poor digital connectivity.

Our citizens in rural areas should now demand for these basic needs. If there is public demand, the rulers have to fall back upon it.

There are areas, where Science and commerce stream is not available to students. The Citizens should demand for these basic facilities.

No more just Bijli, Sadak aur Pani, but Siksha, Swasthya aur internet bhi.

 

High merchandise deficit- its causes and cure

India is continuously running deficit in merchandise trade i.e. our merchandise exports fall short of merchandise imports.  Before coming to any conclusion, we should analyze certain facts:

1. We produce very small portion of our crude oil needs thus ballooning the oil import bill. 

2. We import a significant amount of gold every year.

3. We have a huge population leading to high consumption levels making imports necessary.

How to mitigate the crisis? Is there any solution?

Let us elaborate on above three points for now.

Crude oil imports: 

Do we know that Japan has to import almost every important raw material, which it process and export after value addition. We export iron ore and import high quality steel needed for automobile and other industries. We are not able to match international technology. Some of the reasons may be:

Most of our riches are not inventors or technocrats like Ford for Motor Vehicles, Carrier for Air Conditioners, Edison for electric bulbs, Bill Gates for Microsoft (Operating System), Jeff Bezos for Cloud Platform (AWS) and list is endless. How many Indian Billionaires can boast of creating or developing a unique technology, product or service? Most of our billionaires upgraded themselves from traders. They went into manufacturing with borrowed technology from elsewhere. How can you compete with them? They have already charged high fee for the technology making your products costlier and then passed on the second hand technology, as no commercial establishment will ever pass on the best technology it has.

Here again, Japan after 2nd world-war imported technology from western countries, went on reverse engineering, improved upon it and relaunched the superior products. Here again, our manufacturers have to spend a significant portion of profits into R&D for upgrading the technology imported instead of looking at the principal for passing on the improved version.

Engaging with educational institutions help a lot, as there are many researchers who have a passion to create something new and there are many who are awaiting trial for their lab level developments to see the pilot scale and commercial scale success. Sometimes, research for developing a product have other simultaneous product developments, which is not available in readymade technology.

A product required for isolating frequencies and disturbances between a computer and human body for the purpose of use in a medical device was found to be useful for isolating the same between the computer and mechanical equipment.

However, we must keep in mind the invention comes from passion and need. It cannot come from job-seeking individuals. Neither it will come when there is no need to invent for survival in absence of strong competition.

Gold imports:

Gold jewelry is a common desire of any Indian woman. It is true elsewhere too. There is obsession for Diamonds and Platinum in other countries.  But the disturbing factor is idle gold. Government has tried in various ways to monetize this gold, but there is little progress in this regard. Jewelry as wearables is understandable as it has designs and cannot be converted back to same design again without incurring a huge cost. But it is difficult to understand the same for temple trusts. There cannot be any specific design need. They can easily monetize the gold reserves with them and earn interest on deposits.

Another reason is lack of proper investible instruments in rural areas, where investment in Gold is done as an hedge against inflation. The formal banking sector has still not been able to penetrate much. Even the banking correspondent model has not made any significant progress. It is difficult for a daily wage earner to visit a bank branch within the official hours. Network of ATMs in market places and POS mechanism can mitigate some problem. In absence of formal banking sector, many fly-by-night finance companies are active in these areas by providing the door-step services.

Banks must think of providing door-step services to at least merchant establishments in Tier-II and Tier-III cities to start with either through POS or cash collection.

Once people start banking, the awareness about other financial products will follow.

Large Population:

India is having a huge demographic advantage at present. It means it has more workable hands than people who required to be fed. It is a blessing in disguise. There are many countries facing the problem of feeding its ageing population. But the crisis lies in improper skills provided to our younger generation. We have inadequate number of medical professionals and healthcare workers. This is in common knowledge. We are suffering in research too as most of our tech graduates are working for other countries. 

Some of us criticize them for not being patriotic enough. We must look at ourselves. They are at least contributing more to the nation than us by earning valuable foreign exchange, which largely offsets the merchandise deficit.

We need to develop infrastructure enough to produce more medical healthcare workers, engineers, researchers. No Higher Secondary School should be permitted without Science stream. We must have a Science College in each district, if not sub-division with fully equipped laboratory.

We talk of large battery of unemployed youth. We should also analyze the qualifications of jobless and qualifications required for jobs. The data should be available in public domain and educational institutions, so that the young generation opt for right kind of education and do not just enroll themselves to a course for becoming a graduate. 

Unless, we invest heavily on education and research, we can never be able to reduce the merchandise deficit.

Elevated education infrastructure have itself potential of earning foreign exchange by attracting students from other countries. 

   

Bridging the knowledge gaps

Fast changing technology specially in digital world has increased knowledge gap substantially in the society. While there is shortage of skilled personnel available in market, there is huge battery of unskilled workforce remaining unemployed causing a threat to the law and order problem, specially in large democracies like America and India.

This has also resulted in increasing inequality in the incomes of the households questioning the method of calculating GDP for the nations. With the theory of marginal propensity to consume, the concentration of income in fewer hands lead to fall in demand and ultimately, creation of jobs. The knowledge gap is also contributing towards the income gap.

There are many attempts both at Government and Non-Government scale to address this issue and reducing the knowledge gap, but we are still far away to see the meaningful results. I have also been a part of one NGO for two-three years involved in interactions with students coming from various schools and backgrounds, specially from economic weaker sections. Some of my experiences are detailed hereunder:

1. There is huge unawareness among the students and their guardians about the need of the society and expectations from them, once they enter the real world to earn a living whether by way of business or job.

2. There is misconception among the students about the medium of instruction being the cause of their failing at hustings. Rather we should concentrate on learning the necessary languages to improve our skillsets.

3. Our education system and evaluation parameters do not give strong weightage to communication and analytical skills. It is the communication and analytical skills, which helps in acquiring further knowledge and skills required in fast changing skill requirements.

Based on my experiences above, I suggest following programs to be taken up:

1. Organizing lecture sessions in rural as well as student groups from economically weak backgrounds in urban areas. It will be better, if the guardians also attend the lecture session. As this will require use of  the local language by learned speakers, it will also strengthen the local language in itself. This is important for sharing the required information to the deprived classes about the skillsets required to further their studies and career. The speakers should preferably come from varied backgrounds like bureaucrats, corporate executives and not necessarily teachers.

2. Organizing Group Discussions among students on various subjects like water conservation, rain water harvesting, waste recycling, sustainable development, preparation for competitive exams, entrepreneurship development etc. etc. This will not just impart the knowledge about the subjects, but also improve the communication skills of students.

3. Organizing essay competitions on various subjects as discussed above. Essay writing improve the language communication skills immensely.

4. Organizing language classes. Learning languages is very important for communication skills. We must learn the language of the people, whom we want to serve. There is huge workforce working as translators in Europe.

I hope this will help us to mitigate the knowledge gap crisis to some extent.

Equity a boon in the investment market

Equity is boon for both investors and investees and scores over debt in several ways. Surprised, see how and why?

For Investees:

Debt comes at a predetermined rate of interest and repayment terms. Mostly, interest has to be paid at monthly intervals and principal with monthly or quarterly rest, as the case may be.

Often, the investee or the management has to struggle for generating quick cash to meet the payment deadlines. At times, they have to delay the payment to creditors or offer discount to customers for early payments. In general, the hidden cost in delayed payment to creditors and discount to customers is more than the normal rate of interest.

Equity provide a perpetual fund free from pressures of generating quick cash flows to pay interest and repay the debt in instalments. The returns by way of dividends is out of profits generated. In case of large surplus cash, buyback option to the shareholders can also be offered. All these repayments are from profits without any timelines.

For Investors:

Though the debt has definite payment timelines reducing the uncertainty of cash flow for investors. But in some cases, the borrowers are not able to meet the timelines and hence the investor or lender face the asset-liability mismatch. This is very much seen by large number of NPAs and write-offs. Further, the lender does not share the success of the borrower.

Equity investment has more risks and there may be more business failures, but equity investor also share the gains made the investee enterprise. The gains made from successful enterprises offset the losses from the failed enterprises.

Thus, an Equity investor share both gains and losses. The debt investor share a part of the losses, but do not share any part of the gains.

However, the debt as well as equity investment should be well-diversified, so that the failure of one enterprise does not wipe out your capital.