Mar Mehangai

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Mar Mehangai Mandee kiEconomic 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
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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

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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.

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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

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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

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Economic Disaster

• December 2008 Mumbai Municipal Corporations
  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
• Kirit Somaiya

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COMMERCIAL VEHICLE-TRUCK SALESDOWN BY 73 IN
DECEMBER 2008

• MCV and MCV include tipper truck sales

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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
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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.

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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.

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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.

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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.

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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.

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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.

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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

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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.

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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.

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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

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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.

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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 Banks
  deputy head of treasury, Ashish Parthasarathy,
  said, adding it may fall further to below zero
  per cent by second quarter of next fiscal.

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Deflation fears in 2009-10

• Inflation almost halved to a nine-month low of
  6.61 from this years 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 Indias 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.

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Is slowdown forcing employee down-sizing,
cost-cutting at RIL?

• Mon, Dec 22 0215 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.

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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 employeesÂbe those for
  retail or SEZ businessesÂwere 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".

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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.

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Indias top 20 business houses see 65 value
erosion in 2008
(Market Capitalisation in Rs Cr)
HOW THE BIG TEN FARED
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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
  Powers 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

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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.

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ULIP (LIC) VALUE DEPRECIATED TO 50 IN ONE YEAR

• The above figures doesnt 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.

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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.

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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.

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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)

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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 couldnt 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.

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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
  Ministers Economic Advisory Council.

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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.

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The tale of 21st centurys dinosaurs

• Down To Earth - http//www.downtoearth.org.in VOL
  17 ,NO 15 December 19, 2008
• The tale of 21st centurys 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.

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The tale of 21st centurys dinosaurs

• Of course, nothing like that happened. The
  farmers switched to another crop.
• Today, Detroits three big guysGeneral Motors
  (GM), Ford, Chryslerare 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.

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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.

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MISREADING THE CRISIS

• What he said then was lifted almost verbatim out
  of P. Chidambarams 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.

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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 Chidambarams belief that they
  were hocus-pocus. He had blind faith in high
  growth being Indias 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.

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NO RECESSION HERE, SAYS CHIDAMBARAMEconomy will
rebound by middle of next year

• Economic Times, 25 November 2008,
• INDIAS 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.

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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

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