Is our economy over heated?

Indian economy is overheating…I hear this statement almost daily. When I think and analyze, I realize that we are over reacting. We Indians don’t have appetite to digest more than 8% growth probably we haven’t witnessed this type of growth before and therefore, we are trying to find out what is wrong.

Why Indian economy is overheating? Because Credit growth is more than 30% or real state value has more than doubled in metro cities in last two years or sensex’s P/E ratio is 20.

I would have agreed to the argument that India is overheating if we had more house than the number of families or if an overwhelming connection of roads or more than 2-3 airports in each city. As far as I know this condition doesn’t exist as of now. Our middle class families are searching for flats/homes; we don’t have enough good quality roads; our airports are clogged and flights are regularly delayed…so why we are making so much noise.

As I understand, credit risk, particularly real estate lending leads to widespread a banking problem which percolates to a nation economy. We have witnessed this unfortunate sequence of events in Switzerland, Spain, UK, Norway, Japan and US. A period of financial deregulation resulted in rapid growth in lending, particularly in real state related lending. Rapidly rising real state prices encouraged more lending, abetted by lax regulatory systems in many cases. When economic recession occurred, inflated real estate prices collapsed, leading directly to the failures, which affect banking system and economy adversely.

I don’t foresee it happening in India because we have excellent banking regulations in place and RBI modifies and puts a ceiling on different type of lending based on need. Second, 30% credit growth rate is being sustained by manufacturing, capital goods, real state and retail customer loans. Also, we all agree that India is short on demand side and needs to build capacity in each sector. Therefore, I don’t find anything fundamentally wrong with our economy and disagree about over heating.

We have to avoid being paranoid and stop behaving if there is something wrong. We have to look at things in right perspective. India needs 50 cities with world class infrastructure to cater to need and demand of 1 billion people. We need airports, both to carry passengers and cargo, we need to add to our existing railway Network and Road network to carry goods and promote tourism, we need power generation stations, we need car manufacturing units, etc. It all takes money and that’s why we have 30% sustained growth in lending.

Therefore, I agree to Mr. Reddy and he took a balanced approach on last credit policy review. However, he sent a mild warning signal and suggested not to go overboard although there were enough signals to make him wary. One of those signals was that 5 million mobile handsets were sold on Deepawali this year. It was the largest sale of handsets on a single day. His message is loud and clear to banks – Manage your deposits for loans. If you (Banks) come to me (RBI) for money, I will charge you 25 basis points more.

Let’s be confident. India is doing well and all these signals suggest and reinforce that India is going to sustain more than 8% GDP growth.

New Tour...Old Pains and BCCI

I want to write my blog on some other topic like macro economic or latest credit review policy by RBI, however, Indian team and my everlasting love with cricket compelled the writer in me to share my thoughts with you.

Indians were once again humiliated against a quality pace attack on a bouncy pitch. It didn’t happen first time and I am sure it has not happened last time either. Now what will happen? Rahul Dravid and Greg Chappell will change the team for next one day game. The team management will drop one and two players and probably we will have a respectable defeat. Our batsmen will be acclimatized till the last one day game and probably we will win last game as well.

This is the short term solution and we Indians inherently love this approach. We do not have enough vision to think about resolving the problem and avoid this humiliation again. When Clive Lloyd’s team used to drub Aussies in late 70s and early 80s, the Aussies cricket board thought about a long term vision and implemented it. We all are witnessing the result.

Now, the first question comes – does BCCI care to solve this problem? Is BCCI ready to inculcate a professional and visionary approach to future of Cricket in India? My answer to both these questions lies in negativity. People may have difference of opinion here. However, BCCI is smart enough to make its balance sheet stronger on a year on year basis. I read a study which suggested that BCCI grows faster than Infosys! God knows where all the money goes…One more thing – Indian team represents BCCI and not India. It was clarified by BCCI when a die-hard cricket fan lodged a case against them in court.

There was a need to promote cricket in India when BCCI was set-up. Now, BCCI can leave this job to Indian Companies who will be more than happy to do this job for BCCI free of cost! We know what kind of people has been running BCCI at present and in the past. They want to command BCCI not to make a stronger Indian team but to make money in their own way because nobody can question how BCCI is run, courtesy to its autonomous nature.

The seasoned professionals should run this organization like a listed company. You will ask why? The simple reason is Indian Team may be representing BCCI on paper but practically it represents honor and pride of one billion people. It represents India. Sachin Tendulkar and Rahul Dravid are national icons and not BCCI icons! The strength of BCCI balance sheet is driven by Indian people passion in Cricket. Therefore, BCCI must be made transparent and accountable to Indian public. The passionate Indians must be given a chance to run this organization professionally based on their merit, educational qualification and other criteria.

We need professionals like Harsha Bhogles and Sunil Gavaskars to run this organization. I don’t know how good these men will be as administrators but they will enjoy it doing more than commenting on Indian matches.

There is a dire need to create an institution within BCCI which educates and trains our young batsmen on fast and bouncy pitches. This institution may provide India what we are looking for last 74 years – a genuine fast bowler. MRF pace foundation and Cricket Academy are delivering but we need a focused and planned approach to win one-day and test series in Australia, England or South Africa in coming years.

Sometimes I thank God that only 10-12 nations play cricket otherwise our ranking in Cricket would have been same as that of Football, courtesy to BCCI. BCCI is not different than other sports governing bodies in India. Then what is the difference? The only difference is “we”.

My comments on Cricket

Let me take a dig at Mr. Speed. Malcom Speed has once again tried his best to stir the Indian nation. He can’t digest Indians as economic superpower of cricket. But, Mr. Malcom Speed should also read business pages of his tabloid and learn that India, as a nation is emerging as a superpower. Tata Steel has bought Corus, the UK national pride. Mr. Speed also talked about Indian performance in recent matches; he must look at his own team which has been reduced to nothing except that they won Ashes 2005. I am ready to discuss about his team performance before and after Ashes 2005 and Mr. Speed will not find the discussion interesting. Mr. Speed, if we Indians want, we can have our own world cups and we don’t want ICC as a governing body of cricket which does nothing but provoking racism on and off the cricket field. Mr. Speed, please wake up and accept Indian superiority or mind your own business.

Indians were humbled in the current ICC Champions Trophy in its own den. It doesn’t happen frequently with our lions. The Indians look tough to beat in India but anything is possible with this team in its current form.

The problem starts from the beginning, be it bowling or batting. Virender Shehwag is not firing in the ODIs and it is taking a toll on Indian Team. The question is why we are giving him too many chances? Just because he is vice captain of the team or Greg Chappel and Rahul Dravid are more than happy to bet on this endless gamble?

Virender Shehwag needs to emulate Chris Gayle who is responsible for West Indies performance in ICC Champions Trophy. Chris Gayle is improving day-by-day as a cricketer and contributing more than handful in all departments of the game.
The number three position is being rotated ridiculously as a music chair in Indian Team. Any team must ensure in One day Cricket that its best batsmen plays maximum number of overs. Going by this logic, Mr. Dependable should come at number three and play an anchor sheet role to provide smooth and robust platform for our aggressive batsmen. What business Irfan Pathan has to do here? Let’s play cricket in a simple and no-nonsense way. Innovation is an important ingredient of strategy; however, it should not come at the cost of compromising with the basic fundamentals and start resulting in losses. If India needs to chase more than 300 score, I can understand the logic of Irfan Pathan walking at number 3 and showing intentions to blast 50 on 40 balls. But if India is batting first, a grafter should play at number three.

Irfan Pathan must concentrate on his bowling and his job is to get India early breakthroughs. When Irfan Pathan doesn’t get early wickets, Indian bowling looks pathetic and toothless. If Irfan Pathan doesn’t get back to his bowling rhythm, he will go Zaheer Khan’s way and it will be cruel for the youngster. Irfan Pathan is only good as a bowler, he should aim to be great and join the league of Walsh, McGrath etc.

The team India has lost confidence after West Indies debacle. The body language of players shows it. Their body language had conveyed the match result against Aussies. The team was looking awfully short on match preparation part. When we were batting, we could not hit boundaries, feeling as if 22 players were fielding in the ground. When we were bowling, we had forgotten that Ponting was in bad form but we bowled him on his strength and helped him immensely to gain form.

We have to look forward now. Indian team is going to face South Africa where we have not won for last 14 years. Dravid and Chapel should select 11 appropriate men on the match day and win all the matches. I have seen Dravid doing blunders when it comes to last 11. The recent example is match against West Indies. The liftman of the hotel, where the Indian team stayed, will tell you that West Indians are weak against spin bowling. I could not understand playing R. P. Singh against West Indies when Ramesh Powar was need of the hour.
I think Dilip Vengasarkar is right where he commented about talent available in India. It calls for the reforms in Indian Domestic tournaments. There must be a prime tournament where only 6-7 teams should participate. We have more than 20 teams playing in Ranji Trophy where there is yawning gap in talent across teams. It reduces the intensity of the matches and batting or bowling performances can’t and should not be compared. The tournament must ensure matches on variety of pitches and there we can find talent which will match to international standard or will be closer to international standard. Greg Chapel should understand the difference between Indian Domestic Cricket Structure and Aussies Domestic Cricket Structure. I have heard Dennis Lilee saying,”I enjoyed playing for Shield tournament more than Test Matches some times.” Therefore, when it comes to selection, Domestic as well as International experience and performance, both should be taken into consideration. I believe V. V. S. Laxman is better bet than Raina. I heard somebody talking about fielding. Okay, if you don’t have enough runs on board in the first place, what will you achieve by saving 10 odd runs in the field??? I don’t find our batting line up convincing on the South African pitches against their pace battery.