17 July 2015

Subsidies and its Impact on Economy

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Subsidies and its Impact on Economy

It all started with the government trying to win the votes of the farmers and promised them subsidies and write-off on their loans from the banks.  This led to huge amounts of money being written off as bad loans and the money accumulated to such enormous amounts that most government banks had their market share and shares go below their actual value due to the debt that they incurred.

When any company or even anybody that has more debt than they are generating income, for the next succeeding years it is always hard for them to balance their balance sheets.  The thing is you’re trying to match the positives and the negatives of balance sheet.  You can technically write this off, but on the actual books, you are in the red.  Once you are in the red, it now becomes the race to equal it off or come back into the black or positive side of the balance sheet.

Suppose I have a book that is worth 10, but I’m giving it to you for 8.  If my manufacturing or production cost is less than 8, then whatever I’m making will be gross profit and after forgoing my costs and other expenses it will be my net income/profit.  Until the cost that I’m providing it to you does not go below my manufacturing or production cost, I will still make a profit but at a lower amount.

The thing is I will have less money to spend on my development, research and development, expansion plans, salaries, my own lifestyle.  Now when I have less to spend on me and my family, it will mean that I am not infusing that particular amount of money into the local market to buy other products either for my office or for my home.  

As it is truly said, “one man’s expenditure is another man’s income.”  Either I as a manufacturer need to improve upon the way I am making things or I have to increase the cost and sell the product at 10 itself.  If my product is an FMCG or daily use product, it will sell, else I will have less sales.

The thing with freebies is that it should be a win-win situation for both the customer as well as the manufacturer (read as people and government).  Giving subsidies is not all that bad in most cases, but there should be a clear segregation on how it is implemented.  There need to be clear checks and balances on how it is being done and whom it is reaching.

You may go in for a situation where you pan out the repayment of the loan or amount over an increased number of years and also across many generations in family itself, like from grandfather to father to son.  If you know that the person to whom were providing the loan (in the case of a farmer) is going to hit by a hurricane or adverse rain, the bank showed lower the monthly installments or repayment options.

Many generations of governments have truly devastated the economy (there is no other way of putting it) by providing these freebies.  I am not adverse to people deserve this to not receive it, but the affluent and wealthy seriously do not need this and they should be excluded from receiving this.

Impact of Fiscal/Current Account deficit on Indian economy

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Impact of Fiscal Deficit, Current Account Deficit on Indian economy

The main thing is that both fiscal deficit and current account deficit are differences between income/revenue and expenditure.

Fiscal deficit is the difference between the government’s total expenditures and its revenues (excluding money from borrowings).

Current account deficit is the difference between the revenue earned by a country from its trade activities and its expenditure due to imports.

Now that we’ve got the definitions out of the way, in a sense both of them deal with either the positives of the negatives (in terms of income/expenditure) that the country has.  In India’s case, both are in negatives or we have high deficit.  Too bluntly (or technically) put it we are in the red on the balance sheet.

There are many things that have led to this.  An open economy, imports, manufacturing practices, rules and regulations, easiness of setting up a business, subsidies/favors, taxes (corporate), inflation, salaries, infusion of foreign capital and the proper use, et cetera…

When you open up an economy to the outside world, this leads to something called as innovation and brings in various methods and ways to circumvent the rules and regulations (i.e., cheating/evasion).  Any common that comes into power would like its name to be remembered forever for the good things it does, and along the way it tries to do things with a different approach.

Now, you must wonder why after more than 60+ (65) years after independence from British rule we have not been able to become truly independent from our archaic rules and regulations that the British had setup.  We have now become a true software powerhouse and in the coming years become a truly independent manufacturing powerhouse, but with the current colonialist and dynasty type of ruling where the government that comes into power, they try to get their loved ones and relatives into prominent positions to help them later out.

This leads to the Indian economy again going down as the deficit keeps on building up and there is a negative balance which needs to attain zero or rise to the positive or plus side of the balance sheet.  Unless there is a proper overhaul of the current archaic rules and regulations and a serious and it the various amendments and or repeal of these rules and regulations the Indian economy will still be in tatters down the line.

Any government that is going to be in power needs to look at the bottom-line of the economy, proper education and providence of food and shelter to the needy, better building up of its workforce, all-round development, and a boost to the roots of the economy.

The economy is struggling because of the deficit and it is being protected due to the reason that whatever income or surplus (if at all any) is being generated by the country goes into filling up the deficit that has been created over the past 60+ years.  The situation now is that however much we are creating or producing is just not enough to fill that gap and the negativity or bad side effect is that we’re still creating more deficit year over year which still makes the deficit higher.

The government or we as the people have to look at ways to get things going in a way that the Japanese, Korean, and Chinese people have done.  If you remember correctly, after the Hiroshima bombing Japan was devastated, but with hard work and determination they were able to turn themselves around and are now the world leaders in manufacturing of various products.  The sheer volume of which they are able to maintain quality of their products at a lower rate and still beat out competitors is truly amazing.

Our country (India) needs an all-round look into how we do things on all aspects.  There are many areas where we are lacking (if you ask me, I would say in everything).  It is not just the simple things that we look to circumvent.  Our dependence on technology has risen to such a point that we are now not able to live without it.  When we buy things from a foreign country it essentially means that the money we earn is going to that country or it is flowing out of the country to simply put it.

Due to globalization and the three nations (Japanese, Korean, and Chinese) capacity to mass produce on an exceptionally high scale, our local manufacturers and producers are not able to keep up due to hindrances placed by our own elected leaders.

When we do not have inbuilt production or manufacturing, we depend on outside assistance for products.  You have to understand that for manufacturing or production there is the need for raw materials and importing that is somewhat of a good thing.  But our dependence should not be on importing the full finished product, but should be on importing only the raw materials and exporting the finished products.

When you have less income and your expenses are high that is when you get either fiscal deficit or a current account deficit and this leads to our economy going down irrespective of whatever steps we take to bring it back up.

26 August 2013

[AVOID] HOW-To Avoid Credit Card Scams & Scammers

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New Credit Card Scam!

The following was taken from a post on Facebook and edited for better understanding.

This information is worth reading. By understanding how VISA & MasterCard Telephone Credit Card Scam works, you'll be better prepared to protect yourself.

One of our employees was called on Wednesday from "VISA", and I was called on Thursday from "MasterCard". Note, the callers do not ask for your card number; they already have it.

The scam works like this:

The person calling says, "This is (name), and I'm calling from the Security and Fraud Department at VISA. My Badge number is 12460. Your card has been flagged for an unusual purchase pattern, and I'm calling to verify. This would be on your VISA card that was issued by (name of bank). Did you purchase an Anti-Telemarketing Device for £249.99 from a Marketing company based in (name of any town or city)?"

When you say "No" the caller continues with, "Then we will be issuing a credit to your account. This is a company we have been watching and the charges range from £150 to £249, just under the £250 purchase pattern that flags most cards. Before your next statement, the credit will be sent to (gives you your address), is that correct?"

You say "yes". The caller continues - "I will be starting a Fraud investigation. If you have any questions, you should call the 0800 number listed on the back of your card and ask for Security. You will need to refer to this Control Number. The caller then gives you a 6 digit number. "Do you need me to read it again?"

Here's the IMPORTANT part on how the scam works. The caller then says, "I need to verify you are in possession of your card". He'll ask you to "turn your card over and look for some numbers". There are 7 numbers; the first 4 are part of your card number, the next 3 are the security Numbers that verify you are the possessor of the card. These are the numbers you sometimes use to make Internet purchases to prove you have the card. The caller will ask you to read the 3 numbers to him.

After you tell the caller the 3 numbers, he'll say, "That is correct, I just needed to verify that the card has not been lost or stolen, and that you still have your card. Do you have any other questions?" After you say No, the caller then thanks you and states, "Don't hesitate to call back; if you do", and hangs up. You actually say very little, and they never ask for or tell you the Card number. But after we were called on Wednesday, we called back within 20 minutes to ask a question. Are we glad we did! The REAL VISA Security Department told us it was a scam and in the last 15 minutes a new purchase of £249.99 was charged to our card.

Long story made short - we made a real fraud report and closed the VISA account. VISA is reissuing us a new number. What the scammers want is the 3-digit PIN number on the back of the card. Don't give it to them. Instead, tell them you'll call VISA or Master card directly for verification of their conversation. The real VISA told us that they will never ask for anything on the card as they already know the information since they issued the card! If you give the scammers your 3 Digit PIN you think you're receiving a credit. However, by the time you get your statement you'll see charges for purchases you didn't make, and by then it's almost to late and/or more difficult to actually file a fraud report.

What makes this more remarkable is that on Thursday, I got a call from a "Jason Richardson of MasterCard" with a word-for-word repeat of the VISA scam. This time I didn't let him finish. I hung up! We filed a police report, as instructed by VISA. The police said they are taking several of these reports daily! They also urged us to tell everybody we know that this scam is happening.

Please pass this on to all your family and friends. By informing each other, we protect each other.