Road to Nowhere!

It’s heartening to note that successive governments are taking considerable interest in trying to help movement of goods and people across borders. Opening up more border roads, relaxed visa and custom formalities, confidence building measures, social exchanges, reduction in trade tariffs and other barriers are some of the important steps that governments are adopting to facilitate this process.

While the efforts on the governments part is really commendable , I really fail to understand what’s stopping the governments in making interstate transport easier and accessible for the general public and goods- a case in point- the never ending dispute of state road transport between Delhi and UP.

Governments apathy towards such issues causes unmentionable hardship to travelers especially daily workers, consider NCR which comprises of three states and five growing townships, Commuters without their own mode of transport are left at the mercy of public transport that is in absolute state of disrepair-Even if the governments are not into tussle the bus service hardly exists between these suburbs, Rick’s and standard registered taxis cant cross the border because of permit and commercial tax hindrances.

Transport of passengers and goods between Mumbai and suburbs which fall under different districts-Thane, Greater Mumbai, and Raigad is equally an arduous task unless the person chooses to travel by train. Right from commercial tax to octroi forces taxis, Rick’s to avoid picking passengers for suburbs under these jurisdictions and thus deny them a chance to earn a decent earning and force the passengers to pay out of their pockets to avail any avialble means of transport.

Instances like these are very common in North, North East and galore across nearly all the states.
I really wonder, Is sorting out these issues more difficult than opening up borders with neighboring countries-, A recent report on the freight movement released by the central government states that on an average transport vehicles spend more than 40% of their time in state border check posts, and never ending line of commercial tax booths, they also spend an equal amount of fuel in this unnecessary exercise.- wouldn’t the trade benefit more by easing out the formalities in tax structures between states and central governments, while saving large amount of precious fuels which in turn would make goods and services cheaper!

Is it a question of miscued priorities or complete lack of understanding of needs of the electorate? I’m perplexed! Does anyone have any idea about this?

Why Rising Rupee shouldn't be a Cause of Concern?

A lot has been said and written about rupee appreciating significantly against the dollar in the last few months, from the highs of 46 to a dollar it is presently being traded at 40.5Rs.

While proponents favoring this rise attribute it to weakening dollar vis-à-vis other currencies, rise in the trading capacity of our country, less demand of dollar in the primary market and solid indicators conveying a improved economy (Last week was very significant in this- The market value of total stocks in BSE crossed 1 trillion dollar-again a result of appreciating rupee and very proudly India now belongs in the trillion dollar GDP club).

Opponents of this foresee a death knell for Indian Export Industry, compounding of problems for Indian software services which they feel will loose out on their competitive advantage.

Some questions to ponder:-

What does the government do to counter this? Is this beneficial? Is the scare raised by certain quarters regarding the threat for real?

To answer these let us first understand why the rupee rose so significantly?

The reason for India’s burgeoning forex reserve(in excess of 220billion dollars) is due to vast amount of direct FDI inflow in the country, increase in the remittances by NRI’s, On top of that to counter inflation, dry the liquidity and to prevent overheating of economy the government raised the savings rate hence even large corporate and foreign governments started parking their surplus funds in our country-This creates an imbalance between demand and supply of dollar hence the Rupee started appreciating phenomenally.

So where does Exports fit into this maze of finance and economics-Over the years Exports just like reservation has become a favorite duck of successive governments, Strong exporters lobby has forced governments to go all out to protect something which does not help in improving collections of direct taxes (Tax deduction of 100 percent is offered on Export Profits) - Despite all the favors meted out to this industry we still have an trade deficit of over 50 billion dollars.

Economist estimates that if we remove the artificial inflation of rupee the rupee still can smartly trade at 30-35Rs- Remember Rupee was devalued to bring dollars into the country and make our exports competitive during the Narsimha Rao regime. Its been more than 15 years Exporters by now should have learnt how to tame the volatility in the market!

After exporter bashing the next line of thought would be- How would appreciating rupee really help us?

Appreciating Rupee would make our imports cheaper-India imports over 70 percent of its crude oil requirement - a reduced amount of oil bill will make the cost of energy cheaper- Food for thought- India is fast becoming an extensive energy dependent economy, reduced energy and transportation cost would make goods and services more cheaper providing larger access to it, increasing the demand and thus proving it beneficial by economies of scale-A cheaper dollar would also help our emerging tourist class to visit more offshore places, and they can also get some good Spirits that I’ve been looking for at cheaper rates ;-)

Exporters would be crying hoarse after reading this- Agreed I don’t have panacea for their misery,

Some suggested solution that I see helping them come out of self inflected pain

Don’t compete on pure cost advantage rather move higher up in the value chain.
Don’t try and force our governments to adapt policies akin to China instead emulate progressive trade practices of Korea,Japan or Taiwan(value of Taiwanese Dollar is close to 33Rs and its an export surplus country)
Exporters can also alter the way Software services are conducting their business, by smartly hedging their risk, by trading in other currencies largely Pound sterling and Euro.

I’m sure the prodigious trio of Honorable Prime minister Mr. Manmohan Singh, Planning commission chairman Mr. Montek Singh Ahluwalia and our very own Finance minister P.C Chidambaram are stalwarts in this area (I revere them) along with Reserve bank governor Y.V Reddy can bring about some quick fix solution as well as long term radical changes in the way money is being handled and perceived in this country.

Psst Psst- The views/Ideas/Opinions expressed in this context are completely of the writer. It might be a bit boring to read but I endorse this view in its entirety. I do not vouch for completeness and usefulness of this in any form-however opinions and feedbacks of others are most welcome.