Mar Mehangai & Mandee ki Economic Chaos & Crisis

Mar Mehangai & MandeekiEconomic Chaos & Crisis Factories Bandh – Naukari Bandh 9% Growth in 2007! NEGATIVE Growth in 2008 A presentation on Facts of Indian Economy Wednesday, 7nd January 2009, Mumbai Dr.Kirit Somaiya, Chartered Accountant, Ph.D Member BJP National Executive

Economic Chaos & Crisis • We are in economic crisis. December 31 data indicates its beginning of Layoff & Closures. • Octroi collection reflects pattern of consumption in a city. Octroi collection of Mumbai in Dec 2008 is down by 19.16% than Dec 2007. Crude Oil consumption in the city is down by 51.21% • Pune-Pimpari-Chinchawad 4500 workshops closed down resulting into unemployment of 1 lac workers • Export down by 10% • 7 lac workers lost job in Export Industries • Financial Services, Real Estate, Large Retailers same story • In the same year 2008 we are experiencing ‘Top of Inflation & Deflation’. 2009 going to be the worst

Economic Disaster… • Vehicles sale down by 25%-Bajaj sale down by 33% in Nov 2008 • Truck- Commercial vehicle sales down by 73% in Dec. 2008 • Tata Steel sales down by 14% in the quarter end on Dec. 2008 • Labour intensive expose down by 64.4% in Dec. 2008 • 25% Stocks / Shares on NSE & BSE found illequid in Dec. 2008 • 20.8 million sq.ft. Mall supply projected in 2008 is brought down to 9.7 million sq.ft. in Dec. 2008 Observations.. • Out of 74 Malls to be constructed / completed / started. Only 34 seems to be under completion. 40 Malls scrapped.

Economic Disaster… • Two young lady engineers running an electrical workshop in Pune for more than 10 years. Facing 20 days closure/pm from December resulting into unemployment for staff of 62 • Mumbai Building Construction activities are at halt since Feb 08. For past six months more 1 lac construction workers have no work. • They have no security as employed through Contractors. All major cities in India facing the same situation. • Hotels in Mumbai & other Metro cities occupancy rate was 110% in December 2007. December 2008 its 20 to 30%. One 5 star Hotel Owner told me ‘Since starting of My Hotel this is first time I am facing Operational Loss’. • Premium Airways of India are abandoning their late evening Mumbai-Delhi flights due to ‘No Passengers’

Economic Disaster… • A Share Broker of Mumbai closed 3 of 5 Outlet-Terminals lay-off to 73 • 9th January BSE Sensex touched 21000. Mr. Chidambaram, Finance Minister immediately came on TV & gave statements “Its my economic policies. India will not look back. We are now in double digitGrowth”. • 28 Feb 2008, Congress-UPA govt. presented Budget. All three Finance persons of present govt. Prime Minister Manmohan Singh, Finance Minister Chidambaram & Deputy Chairman of Planning Commission Montek Singh Ahluwalia started boasting “Ours is internal growth. Fundamentals are sound. Ab pichhe mudake nahi dekhenge.” • In the same year 2008, just in 10 months the country is facing worst economic situation of decades. • Factories Bandh – Naukari Bandh

Economic Disaster… • December 2008 Mumbai Municipal Corporation’s Octroi collection is down by 19.16% compare to December 2007 • December 2008 India is to have negative growth but Our PM,FM mis-leading the Country by projecting 7% growth • Bull run in an Open Economy- Capital Market may be accepted but conversion of it into Bubble is dangerous. Bubble is to Burst, we are observing the same now. 2009 shall be the worst year India has seen in decades. • Congress-UPA Govt. , PM & FM pushed-allowed creation of Bubble which has Burst now. They owe explanation to the Country KiritSomaiya

COMMERCIAL VEHICLE-TRUCK SALESDOWN BY 73% IN DECEMBER 2008 • MCV and MCV include tipper truck sales

PROPERTIES REGISTERED AND STAMP DUTY PAID IN DEC. 2007 & DEC. 2008 – KURLA II AREA PROPERTIES REGISTERED AND STAMP DUTY PAID IN DEC. 2007 & DEC. 2008 – KURLA IV AREA

City Bank report on Financial Markets prospects in 2009 • India's exports declined by over 12 per cent to $12.8 billion in October against $14.5 billion a year ago • due the global recession, India's export growth would slow to 5.9 per cent in the next fiscal.exporters have lost orders worth Rs 1,792 crore on account of the slowdown in global trade and lack of demand from the US and European markets, the main destinations of Indian products • A sample survey of 21 companies found that 65,507 jobs were lost in the country in various sectors between August and October,“ • According to citi sources, over 65,000 employees have lost jobs during the three-month period ending October in India on account of the economic slowdown.

Tata Motors • Block closure from 21.11.2008 to 26.11.2008 for six days, as per provision in Agreement of 2001 for 12 days block closure every year by 50 : 50 principle of leave, Workers - 3 days leave by workmen, 3 days paid leave by Company, Management staff required to apply leave for all six days. Have removed about 4000 Temporary workers.

Force Motors • Power shortage added to problems • Have introduced 5 days a week for November 2008 and may extend the same to December 2008, this is done as per the provisions in the agreement for block closure, applicable to all workmen and staff also.

SKF • A section, supplying bearings mainly to textile machinery manufacturer has less work load since last 4 to 5 months, so around 20 employees are transferred to other sections. • Company is to run 7 days with staggered off, now they have implemented 6 days working with one common off for all the departments.

Kirloskar Oil Engines • Have introduced, 5 days a week working for Pune, Ahmednagar and Nasik Plant. • Management staff will not get salary for the 6th day, which is declared as off. • Negotiations are in progress with workers for agreeing to similar principle of no wages for workers.

Bharat Forge Ltd • Have introduced, 5 days week for most of the areas, Wages, Salaries are paid for the additional day off. • Trainee Technicians to be removed as per date of completion of Training period. • Probationary Technicians to be removed as per dare of completion of probation. • Buying new cars for new promotees and replacements stopped. Buying of cars for VP's stopped.

Thyseeankrupp Industries Ltd • 5 days week for production. • No wages will be paid, as it is provided in the Wage Settlement. • Air Travel, only for GM and above positions, only by economy class

Kirloskar Brothers Ltd. • 5 days week in Dewas plant, employee may take leave or it will be leave without pay. • Hiring of high end Taxis stopped, hiring of taxies only in case of emergency and only Tata Indica taxies. • No guest entertainment. • Air travel only for GM and above and that too only by economy class. • External Training Programs stopped. • Recruitment freezed. • Foreign travels, bare minimum, only with CMD's approval. • Entitlement of unlimited petrol limited to 225 liters.

Tata Yazaki • 5 days week for all employees, no wages paid for the day of extra closure to contractor operators. • Foreign travels restricted. Daily Allowance while on travel reduced. • Travel entitlement reduced by one step for all grades. • No power is provided after 6 pm, all offices to work only till that time. • Contract employees will be reduced by 50-60%. • No external training.

Sales – Disaster ?Comparison of Companies Sales • Bajaj Auto Ltd. – Sales down to Rs.7.90 Cr in Sept. 2008 from Rs.57.39 Cr in Sept 2007 • D S Kulkarni Developers Ltd. – down to Rs.-26.64 Cr in Jun 08 from Rs.122.10 Cr in Mar 08 • Idea Cellular Ltd. – down to Rs.47.05 Cr in Sept 08 from Rs.147.34 Cr in June 07 • D F L Finance Ltd. – down to Rs.7.88 Cr in Sept 08 from Rs.98.31 Cr in Sept 07

Meltdown signs register on the road • In a sign that the economic meltdown has hurt the automobile industry, Regional Transport Offices across Mumbai reported a big drop in registration of vehicles in the last few months.

Deflation fears in 2009-’10 • Indian economy may go into deflation by the second quarter of financial year 2009-10, as there are fears of inflation going below zero per cent in the face of unprecedented fall in crude and commodity prices. • “If the current pace in inflation-decline continues, the figure (in WPI-based inflation) may slide below 2% by end-fiscal,” HDFC Bank’s deputy head of treasury, Ashish Parthasarathy, said, adding “it may fall further to below zero per cent by second quarter of next fiscal”.

Deflation fears in 2009-’10 • Inflation almost halved to a nine-month low of 6.61% from this year’s peak of 12.91%, giving more space to the RBI to signal further cuts in interest rates. Deflation occurs in an economy when the negative inflation prevails for a long period. In the event of deflation, the Reserve Bank will have to enhance money supply and lower rates further “to support inflation”, IDBI Gilts’ Economist Amol Agarwal said. Citibank India’s CFO Abhijit Sen echoed this view saying the rapid decline in the headline inflation is likely to continue in the coming months. “In my view, deflation is a remote possibility in this economy. However, if the inflation continue to fall to much lower levels, this would have an impact on the profitability of banks, as it would affect the credit demand,” Sen said.

Is slowdown forcing employee down-sizing, cost-cutting at RIL? • Mon, Dec 22 02:15 AM • Economic slowdown has not spared even the largest conglomerate in India, Reliance Industries, which is carrying out major cost cutting measures, including downsizing of the staff, and has apparently put on hold mega investment plans. • From retail to SEZs to the $6 billion semiconductor business, investment plans appear to be caught in the web of the slowdown. • "As a good corporate practice, we constantly examine cost competitiveness and take appropriate measures regularly. It is a practice which is undertaken constantly at Reliance," a spokesperson for Mukesh Ambani-led RIL group said.

Is slowdown forcing employee down-sizing, cost-cutting at RIL? • He was responding to a query whether the group was going ahead with a major restructuring and if it had mandated consultants like Cummins to recommend human resource remedy • Though the spokesperson dismissed the possibility of restructuring as speculative, sources said that one of major indicators of the cost-cutting was that RIL had vacated five floors it had rented in a Connaught Place building and moved to another office in Okhla, amid speculations that many of the outsourced employeesÂ—be those for retail or SEZ businessesÂ—were shown the door. • Asked if a salary cut of up to 15% was in the offing for its middle-to-senior level executives, he said the query was "baseless and speculative" and "we do not wish to comment on the same".

Is slowdown forcing employee down-sizing, cost-cutting at RIL? • He also evaded a direct reply to a question whether the group had cut its workforce, including a majority of the contractual as also the workers from contractors for various businesses, by up to 20,000 people so far this year. • However, some of the employees working with the conglomerate said that the cost-cutting is to the extent that a department head, who was used to having an army of people, has been asked to limit his sub-staff strength to just one and work on a shoe-string budget on cars, petrol, office boys, travel and entertainment. • Though there is no formal word on the exact staff downsizing that has taken place or what was the cost of severance, it is interesting to note that RIL's staff cost dropped over 10 per cent to Rs 588 crore in quarter ending September, 2008 from Rs 651 crore in the previous quarter.

India’s top 20 business houses see 65% value erosion in 2008 HOW THE BIG TEN FARED (Market Capitalisation in Rs Cr)

90% IPOs trade below issue price • NEWSWIRE18 New Delhi, 31 December With 38 of 42 initial public offers (IPOs) that were listed since January 1 trading below their issue price, primary market investors and India Inc never had it so bad. If the euphoria over the Reliance Power’s 260-million-share mega issue in January gave the impression that Dalal Street would kick off 2008 with a bang, the subsequent market meltdown and the global financial turmoil has ensured that the IPO market would end in a whimper instead. • Among 38 companies trading below the issue price, Mumbai-based engineering and construction company Niraj Cement Structurals is the worst performer. The stock ended on Tuesday at Rs 17.80 on the BSE, down 90.6 per cent from the issue price of Rs 190. • For the remaining 37 firms, 2008 has been no different. Stock of companies — Chemcel Biotech, First Winner Industries, Tulsi Extrusions, — are down over 80 per cent from their issue prices

MFs get poorer by Rs 1,50,000 crore • PRESS TRUST OF INDIA New Delhi, 27 December For years, they used to be ameans of gains for investors in both good and bad times. But 2008 was different. Mutual funds became poorer by about Rs 1,50,000 crore, or about one-third of their total size this year. • Such has been the impact of these losses — which accounted for nearly three-fourths of the overall gains in 2007 —that investor confidence was shattered in just a few months of the downturn. • The mutual fund industry in India, with nearly 36 members, was regarded as a safe avenue of mutual gains for investors till 2007 — when their total wealth grew by more than Rs 2,30,000 crore to Rs 5,50,000 crore. • However, beginning early in 2008, wiped off close to Rs 1,50,000 crore this year, bringing its asset size to nearly Rs 4,00,000 crore and leaving the industry shattered with ahuge liquidity crunch.

ULIP (LIC) – VALUE DEPRECIATED TO 50% IN ONE YEAR • The above figures doesn’t include charges deducted towards • Risk Premium - Accident Benefit Premium Critical Illness Premium. • And Service Tax on above charges. • The actual amount will be less due to above charges. • This is NAV of Rs.10,000/- invested a year ago.

You did not see this Prime Minister! • Sunil Jain, Proprietor/Exporter IC Textiles- 1100 workers sacked • The textile sector has been facing downturn since last year. Sunil had a mill manufacturing cotton yarn. It was a 100 per cent export oriented unit with a turnover of Rs 120 crore. Last November it had to shut down the mill and sack 1100 workers. • Now things are worse. Sunil had a staff of 150, now just have five. Had an office of 3000 sq feet but now it is less than 1000 sq ft. • Ashok Leyland has decided to moderate the production plan for the next two months.Ashok Leyland's manufacturing plants, will work 3 days a week, until December 08.

You did not see this Prime Minister! • S.P. Oswal, chairman, Vardhman Group, Ludhiana-based Rs 3000-crore textile giant says ‘ The textile industry is definitely hit by detrimental effect of slowdown. More so, because exports form 40 per cent of India's 55 billion dollar textile industry. • The orders are less and pressure of prices is far more, the retailers want the prices to be cut further. We have shut down our capacity from 7 to 10 per cent. The product lines where the orders are less are being shut down. • Never before in my 42 years in textile industry did I ever have to shut down our capacity because of a lack of orders. In the present circumstances, holding inventory is far more criminal and shutdown is an easier option’.

You did not see this Prime Minister! • Many of the software companies in Tamil Nadu have postponed their expansion plans including infrastructure development. Companies that survive in this slow growth phase would see a robust rise in the long run. —Sankara Raman Vaidhyanathan, Managing Director, Quintegra Solutions, a 100 million dollar company IT, Textiles and manufacturing companies are worst hit by the current US and Indian financial crisis. —Manickam Ramasamy, Chairman, Tamil Nadu state council-CII We are closing down our 50 branches. Around 200 employees are to be affected. But we would endeavour to accommodate them in other companies in Murugappa group. —Atul Pande, Managing Director, Cholamandalam DBS Finance (With Ramesh Vinayak from Chandigarh and Duraiarasu from Chennai)

Stories of some of those affected by the recession in the job market. • ASHOK JAISWAL, 30 Company: GlobalLogic Position: Software engineer Salary: Rs 18 lakh p.a. The week couldn’t have started on a worse note for Ashok Jaiswal, an employee of the Noida-based Itcompany who was summoned by his employer only to be told that he was among the 17 employees who were being “laid off”. • AYUSH JAIN, 30 Company: Kotak Mahindra Position: Trainee (wealth management) Salary: Rs 15,000 and above Family: Seven members. This business administration graduate from University of Indiana,US, thought he was one of the luckiest guys to have returned to India and clinched an offer from a leading bank. Not any longer. He was told resign on October 31, with three others.“It was a rude shattering of a dream,” says Ayush. “Buoyed by the increasing presence of high networth individuals in India,I was looking forward to a career in this lucrative line. ”Within 3 month of working,the ominous signs made their telltale presence felt.

SHOCK AND AWE • Economic Times, 13 December 2008, SHOCK AND AWE • IIP IN THE RED FIRST TIME IN 15 YEARS • OCT OUTPUT FALLS O.4% VS 12.2% GROWTH IN OCT ’07 • INDUSTRIAL production unexpectedly fell 0.4% in October, slipping into the negative territory for the first time in 15 years, The drop was on the back of a 1.2% year-on-year contraction in manufacturing activity, • Drop in demand in overseas and domestic markets. Manufacturing accounts fornearly 80% of the index of industrial production (IIP), which rose by a revised 5.5% in September. • “The situation is much graver than expected,” said Suresh Tendulkar, chairman of the Prime Minister’s Economic Advisory Council.

Negative returns • Indian Express, 13 December 2008, Negative returns • The fall in industrial production in October 2008 is an indication of what sudden drying up of liquidity can do to production. For the first time in a decade output actually fell, rather than merely having a lower growth rate. October was a very difficult month with both big and small companies suddenly witnessing huge credit constraints. • With a slowdown in the world economy, the months ahead are going to be difficult and there is no room for complacency.

The tale of 21st century’s dinosaurs • Down To Earth - http://www.downtoearth.org.in VOL 17 ,NO 15 December 19, 2008 • The tale of 21st century’s dinosaurs • Have you noticed how the mighty automobile industry in the US is beginning to sound like the now infamous tobacco industry at the time of its collapse, taking cover behind the people it employed to whitewash its inefficiency and perhaps its sheer inappropriateness? • The tobacco industry, in its last days of conviction, when it became clear that the science of toxicity of this leaf was real, hid behind farmers who grew it. • It argued (as it still does in India) that if cigarettes went out of favour, it would destroy the livelihood of thousands who toiled in the fields, as also its workers and ancillary infrastructure.

The tale of 21st century’s dinosaurs • Of course, nothing like that happened. The farmers switched to another crop. • Today, Detroit’s three big guys—General Motors (GM), Ford, Chrysler—are wrangling before the US Congress for a US $30 billion bailout. • And even though they face tough going to explain why they deserve this massive injection of funds, when they missed all the signs to reinvent their business towards fuel efficiency, influential senators have made it clear, “bankruptcy is not an option.”

MISREADING THE CRISIS • The Telegraph, 25 November 2008, MISREADING THE CRISIS • - Indian producers are running into losses and out of cash Ashok V. Desai • The prime minister has much to think about. So he leaves management of the economy to his finance minister. But he reads newspapers, and travels round the world; the developing global crisis could not escape him forever. He first took cognizance of it while he was in Paris for the Indo-European Union summit at the end of September.

MISREADING THE CRISIS • What he said then was lifted almost verbatim out of P. Chidambaram’s catechism: “The Indian economy has grown at an average rate of 9 per cent in the past four years. It is expected to slow down in 2008-09 reflecting the slow down in the global economy. Even so,it will grow between 7.5-8 per cent. More importantly our medium term prospects remain strong based on sound fundamentals. We have weathered the current credit crisis facing the global banking and financial sectors. Our savings rate is touching 35 per cent. Our direct tax collections for the first five months of the current financial year grew by 48 per cent compared to last year. India would, therefore, continue to provide a stable platform for businessmen and investors.”

MISREADING THE CRISIS • He was saying that he believed the “slowdown” in India was imported. Figures of industrial growth produced by his own statistical office were showing a slowdown from March 2007 onwards, much before the global crisis; but he either missed them or accepted Chidambaram’s belief that they were hocus-pocus. He had blind faith in high growth being India’s privilege and prerogative. He thought that a high ratio of savings to national income in 2006-07 could ensure high growth in 2008-09; he forgot what Keynes taught: savings are income that is not spent; they actually reduce aggregate demand if they are not matched by investment.

NO RECESSION HERE, SAYS CHIDAMBARAMEconomy will rebound by middle of next year • Economic Times, 25 November 2008, • INDIA’S economic growth will rebound by the middle of next year, after expanding at a slightly slower pace this financial year, because of the ripple effects of various stresses in the global economy, finance minister P Chidambaram said. Although the government has already forgone revenue worth Rs 31,000 crore through tax cuts, it is open to doing more to stimulate the economy if needed, the minister told an annual conference of economic editors here on Monday.

Crisis & Chaos • Yes its true. We wasted the Opportunity. Government allowed, participated in creation of bubble. Did not created sustaining capacity to maintain 8+ % growth. Neglected infrastructure. Went into short term benefits. Our Finance Minister was busy with Sensex. Mr Prime Minister December 2009 is negative. Please accept the facts & stop talking about 9% growth • We are moving from inflation to deflation. Millions are going to loose jobs. Small & Big. Construction worker to IT Engineer. Its crisis of confidence. Congress- UPA government owes explanation to the country Dr Kirit Somaiya

Mar Mehangai & Mandee ki Economic Chaos & Crisis