Trade

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Indian Economy – Problems as on Sept 2017, and Way Forward

Published September 4, 2017 by vishalvkale

The enclosed article {Biblio. 1} by Mihir S Sharma, one of the few straight talking Economists on Indian Media, does raise some excellent questions. It is a superb analysis of the shoddy economic management – and also raises the fact that something is indeed broken. The economy requires deep seated reforms at core levels-  not vacant sloganeering grandiose plans. Quite correctly, the need of the hour is attending to the real issues that confront on the Business, Trade and Economic Front; as well as a straightforward analysis of what is wrong, devoid of Jumlaas and vacuous statements.
  



MACROECONOMIC BACKGROUND – OVERALL
All Macro-Economic Parameters are in the doldrums, as should be evident to all but the most devoted Bhakt; the time is now ripe for us to rise above narrow parochial statements, and try and get to the root of what ails our nation on an economic front. High NPAs, Low Credit Offtake, Slowing growth for 6 straight quarters, slow export growth and an economy on Government steroids… and many other parameters that we can assess – all point to the facts that this are not right, and there is something wrong somewhere that need correction. What is more, we are already at 93% of the fiscal deficit target for the financial year, and this is just the first week of September.
A glance at the Economy does not inspire much confidence; and this isn’t cyclical in nature. Sure it will turn around on its own – some parameter/s in the external environment are certain to get positive over time – allowing another burst of high growth, which will push the required structural changes into the background. It is just a question of time. Question is -we now have the opportunity, and a clear political mandate, to get some real reform going; can we take advantage of this? This does seem unlikely, as Media and public is once again focusing on the small good news of GST July Returns, which is like celebrating a 4 in an ODI when you require 22 runs an over to win!
MACROECONOMIC BACKGROUND – THE BIG BOYS
The Big Boys of the Indian Economy have no appetite for investment; neither do they have the required resources in their Balance Sheets to take further risk. The small boys, always under-represented in voice in Media, with little or no public imagination behind them, go unnoticed. Their performance, with both Profit and Revenue slippage in 16-17, is also rather worrisome; all in all, a bleak picture. Add to this  the rather unfortunate fact that access to Institutional Credit for these small players is still far from as good as it should be, a fact that goes woefully under-reported. Thus, we arrive at a situation where it is Government spending which is driving growth; rather a sorry state.
MACROECONOMIC BACKGROUND – THE SMALL BOYS
Another article, again by Mihir Sharma – kudos to him for a series of stunning analyses – points out : “A recent analysis of listed companies by the Reserve Bank of India showed that companies with paid-up capital of under ~50 lakh saw net profits fall by 23 per cent in 2016-17. Companies with sales of less than ~25 crore saw revenue fall by 44 per cent. This doesn’t look like a sector capable of reviving the supply of jobs. Nor is investment here going to be easy; commercial bank credit has slowed so much, and the government has been so slow to resolve the banking crisis that alternative forms of financing investment will be needed: Corporate bonds, for example. But, naturally, that helps only larger companies. If there’s a revival, it will come at the top end of the scale.” {Refer Bibliography}
GST
Sure – the GST will deliver its benefits over a period of time, be it tax base, regulated transactions, cost savings for businesses et al – but that does nothing the change the fundamental problem – low credit offtake, high NPA, declining sales and investments and so on. The problems of the SMEs will remain as they are – access to credit, low technology adoption, distributed ownership and operations, managerial skill issues and so on. That leaves us two choices – treat this as cyclical, and applaud GST… or push our sleeves and get to task of attending to what is wrong, avoiding grandiose statements and plans.
AGRICULTURE
To make matters more interesting, 233 of 633 districts are monsoon deficient as on date, and adding to this is other detailed analyses of precipitation distribution, making things uncertain, though not a cause for Alarm yet. One can only hope for a decent precipitation September month. Agriculture is just coming out of a long rut, and has seen a spate of loan waivers; further, it is a contributor to only 19% of GDP. Its issues are a debate unto themselves, and are far longer terms horizon solutions, which we do need to take – but that is another story, to be taken up later. The question in this overall backdrop – what can be done, firstly for immediate respite and secondly for longer term improvement?
WHOSE RESPONSIBILITY?
 At this point, the Bhakts get personal and state – why don’t you suggest a solution? That is a fallacious approach to take, as it  diverts attention from the issues, and shrugs off responsibility from the leaders we have in Parliament, in various think tanks, institutions, and other similar places. It isn’t my place, a part of the public voice, to suggest solutions which require data, and access, and power – neither of which I possess. We have these institutions for a reason – and I can only point out basis hardcore facts and data that things aren’t going smoothly, that a course correction is long overdue. I and people like me can only serve to try and direct public and Media attention towards the right path.
WHAT NEEDS TO BE DONE, AND BY WHOM?
On the longer term, one thing is clear – the SME sector needs to both upskill, upscale as well as get far better institutional support; some changes are being made in that direction, but far more is needed in various support terms from institutions. This is clearly a longer-term solution, and has further deep institutional process and structural reform that will be needed; not an easy thing to attempt, strong politician or not.  And thus, expecting an immediate revival in GDP, Jobs etc from this sector in the short term is expecting a bit too much.

That only leaves us with, as Mihir Sharma correctly points out, the larger boys – the ones who have scale, and established operations. In order that the NPA scenario gets clarified, credit offtake improves, and so on – it is essential we focus on these – or in other words, the domestic environment; rather than chase foreign money and investments, the need is to ensure local money gets mobilized for local investments, demand improvement steps be taken, private investment uptick starts post-haste; for, with the Government already at 93% of its fiscal deficit this year, it has little scope left in its balance sheets for any further activities – and last year, it was government investment that was a key factor in growth!

BIBLIOGRAPHY

The Israeli Relationship – Moralistic, Geopolitical & Palestine Considerations Analysed

Published July 5, 2017 by vishalvkale

This week, just yesterday as a matter of fact, our Prime Minister landed in Israel  – the first ever Prime Ministerial visit to that nation from our side. This is a seminal event; yet, it was saddening to see some voices being guarded, as opposed to openly welcoming this move. In a democracy, it is perfectly fine if you don’t support the ruling party, having voted for the other side; it is accepted as well as expected that you criticize – but when the Government does something laudable – you should welcome it.
This move by the NaMo Government stands in that list; a fully laudable move, one that we would do well to welcome, leaving our apprehensions aside for the time being. On that other hand – this is not a time for chest-thumping either; let us reflect what this move means for us as a nation, and analyse the pluses and the minuses of this new equation. Whatever else we look at, this is not the time for misguided moralistic analyses – Geopolitics is not a field that lends itself to excessive moralization, to be honest. You have to be extremely hard-nosed and practical in Geopolitics.
THE MORAL OBJECTIONS
These stem from the Israel-Palestine issue; and the hard-nosed Israeli response. I feel for the problem, to be honest; but I have to admit with deep regret that they aren’t Indians – and Indian interests have to be placed first. I don’t say I like the way it is being handled – but there is little we can do, beyond a point. We aren’t the world police – and neither do we want to be the world policeman either. The onlyway to look at this problem is from a Geopolitical angle; not a right-and-wrong angle.
Further, it is surprising to note objections being raised basis Palestine, and in some cases China: I do not recall many voices questioning our relationship with the USA, which actively sends arms and aid to Pakistan, and which was the original provider of weapons to our enemy, leading from the Afghan conflict. The continuing support from the USA to Pakistan is a matter of documented record – and yet  few people raised a question as we went closer to the USA. Where were these moralizing objections then?
Not only that, Is the USA’s record crystal clear? Want that we should go into its highly chequered and ugly history? Or perhaps the innumerable times it stopped India, or tried to, from achieving its justified goals? I respectfully submit that The USA has a far uglier record than the Israelis who actually are saints by comparison. Remember the Iraq Fiasco? Where are those WMDs? And yet, we welcome closer ties – because it is the primary world power, and a much-sought after relationship?
I don’t recall as many questions being raised on the impact of our relationship with the Russians as we came closer to The USA. Why is that? So, it is OK if you go after an aspirational relationship with the premier world power, forgetting our long standing support from Russia? That is something that has required far more serious thought, and has been handled very adroitly by all Central Governments we have had; let us give them credit for that. Thus, cant we cut slack for our Government and our Diplomatic forces that they can handle Israel and Palestine with equal aplomb?
Yet, when we come to Israel, we get instant moralization. Where was this moralization when The USA is involved? Its human rights record is ugly beyond mention – yet, no controversy. Where was this moralistic stance when we moved USA-wards, forgetting that it was Russia who has always stood by us? When has the USA ever stood for us in Geopolitics? Almost never historically! What’s good for the geese is good for the gander – you cannot ignore moralistic issues in one relationship, and apply them in another. You have to apply the precise same standards in each case.
GEOPOLITICS
More serious are the Geopolitical objections, which to be perfectly frank – deserve a serious reading, and merit a reasoned response from us. To summarise, these are India-Iran; Arabs; NRIs in the Middle East; and the Israeli-Chinese relationship. We need to look at all of these in an informed debate : a dispassionate analysis of these is required, shorn of ideological baggage. Some of these frankly are fantastic, like the NRI problem or how our NRIs will be treated due to a relationship with Israel – that is just stretching things too far. The Arab world also has relations with Israel!
First, India is seeking alternatives to OPEC actively, trying to reduce the dependence on it for Oil. Second, some Arab nations are anyway fedup with Pakistan due to terrorism, and that is a huge point in our favour. Third, The Arab World is itself giving overtures to Israel – Egypt, Jordan and Saudi Arabia to be specific. We are also building relationships with The Arab World, who can also see our impact in Afghanistan. So, why on earth shouldn’t we build a relationship with Israel?  Fourth, Iran has seen our support to them in the face of The USA – and our diplomatic forces can be expected to handle the delicate relationship balance. That leads to Fifth – the Israel visit comes after a visit to the Arab world!Thus,  If we can balance USA and Russia, we can certainly be expected to balance Iran and Israel, that much seems to be certain. Let us not sell ourselves short.
Now, the Israeli Chinese Relationship. Why on earth should this make us uneasy? First of all, Israel is but of three major defense partners of ours, alongside the USA and Russia. We have hedged our bets, not being dependent on any one partner. Sure, a lot more needs to be done, but the direction is right. Second, Israel had supported us in 1962 against China. While that is no guarantee of the future, it is nevertheless a significant factor. It actively supported our Armed  Forces as well as our anti-terror efforts many times after that as well, including as recently as in 1999 during the Kargil conflict. Third – we are perfectly fine with having a relationship with USA, which is supporting Pakistan openly – but use a different yardstick to judge the India and Israel relationship! That is amazing!
PALESTINE
Finally, on Palestine, I accept that we have been a long-standing supporter of the cause.  But we need to understand that we need to look out for ourselves first. We are in a world with rapidly re-aligning geopolitical relationships. In such changing times, we need to change with the times, and respond to the challenges being raised. A strategic alignment with Israel is a given, as we have many common points and mutual areas of interest. This is not present in the Palestine relationship.  Furthermore, there is no other reason to be reticent; we will have to trust our diplomatic corps to play the balancing role, That is the need of the hour. There is no such thing as a perfect strategy – it is always give and take.
CONCLUSION
This does not include the many areas of trade and scientific commonality that we enjoy with Israel – which is only just one more added incentive for closer and more open relations with Israel. From my opinion, my point of view, it sounds slightly hypocritical to talk of our relations with The USA is one voice, and analyse the Israeli relationship along diametrically opposite tones. In this, I stand solidly with the Government praisers – well done, NaMo Government. You have taken a splendid step for the reasons outined above. That said, it has been a collective effort- it has to be said that all political parties have stood by this relationship for years and nurtured it actively.


Selected References : 

Analysing The Telecom Tangle 1 – Systemic Risks

Published June 14, 2017 by vishalvkale

INTRODUCTION
The telecom sector has been in the news of late for all the wrong reasons – rising stress, high debt, loss making or low profitability, mergers, job losses and lot… this sector is one of the high-points of the India Growth story. For this to happen in this showcase industry seems strange from the outside… the reality is, in my opinion, the exact reverse. The seeds of the stress were sown right at the beginning; all hints to this reality were ignored, and by everyone. I do not recall anyone pointing these, self included; though I did come close, to be honest. Yet, when I now look back with my experience garnered since then – there can be no doubt : the seeds of the problems were inherent in the model itself…
SYSTEMS & PROCESSES
It wasn’t, for the most part, deliberate; the decisions that were reached were all rational decisions made by rational people. They may not have been the right ones, as we know from hindsight, but they were decisions reached with a strategy in mind, as we shall see. Also bear in mind that this was a new trade, with no established learnings, norms, procedures, case studies. In essence we were creating them as we went along. And this was the first, most critical point – we went wrong, as we focused on the end-results – new customer acquisitions – in isolation; there should have been equal focus on establishing industry firsts, processes, learnings, sharing of good practices, deep analyses etc. None of this was done for the levels that mattered. The result is there for all to see!
SYSTEMIC ISSUES – TRAINING
The next error that happened was frankly, stupid in the extreme – I make no bones about it. It was simply inexcusable – and it was simply this : there was never any training imparted to new employees as they came into the company, beyond the perfunctory induction training & some technical training. This is fine for old established trades, with established learnings and processes, and in-built mechanisms at team level. This was a disastrous decision for a new trade with none of these. These first two factors taken together sowed the seeds for disaster, as we shall see how they connected years down the line to create hell.  As a matter of fact, in a brutal indictment of the Telecom & Handset Trades, these two trades stand as the only trades where I have not received extensive training on joining the company. s
WHY IDENTIFY SYSTEMIC ISSUES FIRST?
Yes- there were other problems, as we shall see. You could make the case that the major issue was the investments are not justified by the market or its size. There may be some truth to this; an analysis of this is, however, not on the menu for this article. That too will be attended to, in the fullness of time. Please bear with me, as the aspect of the quantum of investments into the industry is deep, has many parameters, and ramifications in addition to a massive scandal associated with it from our past. So, let us leave that aside for the moment. My point is to first of all identify the systemic risks in the model of business as it was practiced on the field. This is because systemic issues create insolvable long terms, and become critical only over a long period of time.
So what do you do, once you have invested in the business? For starters – you are stuck with that decision, and then it is upto you to make the best you can out of it. And this is where the second phase of problems started, and right at the beginning. Mobile Telephony was a new concept to India; and the implied assumption might have been that customers don’t need education. This was especially so in the period prior to internet on mobile. You were in a new market, in a new industry, selling a new product. And when Data happened – this fledgling problem became a full-scale crisis…
AT THE FIELD LEVEL
The focus should have been on developing the market, deepening it; opening new customer lines; new markets; investing in finding new usages and the market sizes of these new usages {think data here}; studying how it can be a game-changer. If any of this happened-  it certainly didn’t percolate to the field levels, and most certainly did not show up in the customer communications. There was little effort to educate the customer, to create the market. The emphasis was always on acquiring new customers. That is by itself a laudable objective; the problem was that this  was the only present objective. By the time the realization sunk in that merely acquiring new customers is useless if they don’t contribute to the bottom and top lines of your company, the rot had set in.  
By this time, unfortunately, the teams were accustomed to getting customers by any means at their disposal – leading to a Brain Drain from the trade as well, as Channel Partners as well as elite employees realized early on that this was wrong, and quit back to their original trades. This was to hurt, and hurt the trade very badly indeed in the time to come. The complete absence of checks and balances to check misuse, {including out-and-out unethical tactics & short sighted approaches to sales} and short term tactics, or profitability over the long term, meant these practices became systemic- giving rise to a fourth systemic risk in the practiced Business Model.
PROFITABLE CUSTOMER ACQUISITION
There was never any genuine focus on profitable customer acquisition; this is something I did point out, and in my first few months in the trade, as I could not see the point of having a customer who purchased nothing! That said – I readily admit I did not foresee this getting to be an endemic serious and crippling issue in the trade. When the trade did wake up, the solution proffered was wrong; they started tracking calls, in the sense that sales targets were accepted basis first and second calls and so on. Will 2 or 3 or even 25 calls give you a profitable customer? Obviously not! The only answer should have been to move to revenue targets and per customer revenue, and all along down the line. This was never done, at least not till very late.
The core challenge in this trade is  the nature of the cash flow from Telecom service products, which is a service, and a recurrent revenue source. The employees had no idea of the accounting involved in such a different trade; being from product sales, wherein profitability calculations are far simpler. In this trade, a customer registers a profit only after regular usage of the service over a period of time. This should have been clear right from the start  till the last level of the organization – it wasn’t. I had to educate myself regarding the concept of profitability in such a scenario. The companies did not invest in training employees. It is only after studying the theory myself, including case studies {something laughed at by most salesguys} that I came to the realization of the risk of taking a strategy that did not cater to the risk imposed by the nature of the cash flows that emanated from the Business.
The result of this was a front, second and third line totally disconnected with profitability from operations. In a product sales scenario, so long as the pricing decisions have been & and are properly made, inventories planned out, and an intrinsic demand generated, profit is almost a certainly so long as demand continues to arise, and the scalability of the business attended to. However, this is not the case in Telecom Services, which is a recurrent revenue model, involving very different profit concepts. Unless the profitability is built into the strategies, the processes and the systems at field level – disaster is a foregone conclusion, at least at an industry-wide level.
The inability to ensure sufficient revenue per customer is a problem that has roots in this simple issue; it has, of course, since then grown into gigantic proportions, and with many other, more serious parameters now involved. We shall look at them in later parts of this Telecom Series. The key issue here is, had this been built into the DNA of the organization and the industry at the beginning itself, this would have been hard-coded into the entire company. Working with only  profitable customers would, could and should have been the buzzword for the trade. That it wasn’t the case is a Manifest Truth.
CONCLUSION OF THE FIRST PART
Yes, there are issues of marketing strategies involved – wherein you spread the net wide and then draw it in; was this strategy the best one feasible? Yes, in a fast-growth market, you need to grow in tandem with the Market- But that does not mean you incubate a series of deep systemic risks in your business model for too long, which is what happened! We know now, with the benefit of hindsight, that it clearly wasn’t the best way to go about it. The industry numbers tell the tale. A check was badly needed; had this check – that of profitable customers only – been there at the start, with a proper process and strategy behind it – in all likelihood, the situation would not have been as bad. For Business is always a matter of choices – and in this case, the choice apparently was between scale or profit. No one thought that it was feasible to develop a strategy of Building-Scale-With-Profit. And that was the biggest industry failure.

In the next parts – I shall go deeper into these systemic risks, and identify the way forward now for the trade, basis hard-core case studies from other industries I have since worked in, as well as my extensive reading of Business Literature from across the world. Stay connected! Furthermore, at no point do I deny the external factors that were to buffet this fledgling trade. My point is simply that the internal systemic risks made the entire system more susceptible to external environmental shocks…. 

Trump & India : A Reality Check

Published May 6, 2017 by vishalvkale

The election of Trump as POTUS had got the right wing in India in a celebratory mode; there were hopes of this event having a positive impetus on the Indo-US relationship. This hope was, at the outset, a wildly optimistic hope, given that Trump was elected on a protectionist rhetoric, a message of bringing jobs back to The USA; this was, however, ignored in the larger light of his views on terrorism as well as other factors, which seemed to indicate good tidings.
In the approximately 100-odd days since his taking over as POTUS, however, early indicators have given enough reason for the more optimistic among us Indians to become far more realistic; Trump as a President has done exactly as he has promised – which is admittedly a surprise even to me. Frankly, on one side, it is good to see a politician walking the talk in the USA. That said, the other side of the equation has given rise to many, many deep rooted questions which need answering for us.
His focus on creating Jobs in the USA are beginning to give results for the Americans; good for them. But, it has come at a cost. In a connected world, any movement either side in any place will have an attendant cost side on some other side. And in this, we are on the other side, as more Jobs in America mean lesser Jobs in India, as visa rules tighten up, and Indian companies are forced to invest in the USA not just in infrastructure but in hiring as well. This means, as per at least one article, loss of jobs in India, to the ratio of 4:1. This makes perfect sense, given the per capita difference and wage rules difference.
From this one example alone, it can be seen that the coming of Trump is nowhere near being exactly a great thing for us Indians, at least not in the business atmosphere. Now whether it is a bad thing remains to be seen; just cause it isn’t good doesn’t automatically mean it is bad. It depends on a variety of sectors {I have taken but one example} as well as on our response on the diplomatic and business fronts. That is something that we shall see in the fullness of time. But for now, there is enough reason for us to become realistic, stop eulogizing Trump and the USA, and analyse dispassionately.
Having said that, there are early indicators of rising stress in some other areas as well, where either disputes are pending, or where the Trump administration is showing signs of toughness. Taxation in startups and corporates is one such area that comes to mind; the USA reviewing nations with which it has a trade deficit is another area of potentially rising stress. Note that early last month, The Trump administration launched  a 90-day investigation of countries, including India, against which the US runs a bilateral trade deficit – just another example.
Just think of this for a moment; a rich country, doing its best to profit for itself, at the cost of a poor country. Think of the amorality of this hard move. You can call it business all you want – but if you knowthat your move will harm a country with which you are trying to be friends, I am pretty sure that a middle path can be found, so long as there is genuine desire on both sides of the equation. India has shown its desire to be friendly; now the ball is in the the US court to respond. I am not hopeful! Not only is this amoral, it does not sound a very friendly move on the part of the USA!
If that isn’t all, this – aah – trend of moves that have the potential to disturb India doesn’t stop at trade. It extends to the Geopolitical and Strategic levels as well, where there is a lot more clarity needed on direction as on date. So far, the USA has not only shown no indication of acting against Pakistan, it has in fact done the reverse,  trying to re-hyphenate India-Pakistan, offering to intervene in our bilateral matters. More recently, it gave indications of cutting aid to India, while keeping Pakistan untouched!
Put it all together – and the reality stares at you. India-USA are as far apart as they were before; yes-  there are possibilities of great relations, a potential which was absent earlier. Agreed, and granted. But the very real differences in world view, economic realities and priorities, internal realities, and geopolitical differences mean that we need to keep our eyes peeled, and our options open; we need to ensure our interests are protected. And this is where the right-wing can help by stopping the rhetoric!

REFERENCES:

  1. Delhi Solar Policy plans to solve energy crisis; here’s how solar panels will power your homes     
  2. Trump card: Delhi to get tough if US blocks Indian exports
  3. Solar energy subsidy: After attempts for amicable solution fail, India drags US to WTO dispute settlement body
  4. India rejects US offer to mediate with Pakistan
  5. US plans to gut aid to India but continue with $200mn to Pakistan
  6. Every American Infosys hires in US will lead to loss of 4 jobs in India

Protectionism in Trade – Recent Developments Analysed

Published January 29, 2017 by vishalvkale

ENTER PROTECTIONISM!
Worldwide, the rise of so-called nascent protectionist tendencies has seen increasing focus in pink as well as white media; this is almost the flavor of the season. I don’t blame the media – the hyperbole emanating from society, social media as well as the political sphere justifies the focus on this theme. And so long as this focus causes an informed dialogue around this theme, it is a welcome development. We need a serious, informed debate in all Media around this tendency, or perceived tendency.
I say perceived tendency; this may sound counter-factual. But stop a minute, and think through – is it really counter-factual? I am not denying the trendlines increasingly visible the world over; all I am asking is to abandon hyperbole, and focus on the facts. Isnt it a fact, for us developing nations in general – and India in particular {given I am an Indian} – that protectionism emanating from the Western economies has always been the exception rather than the rule? It is only a difference of degree. Why is that degree important is the focus of this article.
First, let us hark back towards history, and consider a few examples from history. Let us start at the beginning – the 50s, when Steel Plant technology was denied to us on flimsy grounds by the USA. What was that? Wasn’t that politics mixed with protectionism? To some, this example may be debatable; to them, there are other examples that can be quoted : Recall the imbroglio over the AMS and Food Security? Solar Panels and Cells? Or Compulsory Licencing and Patent Rules? Preferential Market Access and Localisation Conditions?
Each of the examples above is a clear indication of a powerful western nation – {or nations, if you consider the Food Security issue at the WTO}  – protecting its turf, and very fiercely at that. Other examples readily spring to mind in various fields – IP rights in the Drug field is yet another very evocative example. This is the way of the world – and rather than cry about, let us accept it; and figure out how to fend for ourselves in the midst of these established tendencies.
There is nothing wrong with a globalised world; India thrived on free trade for over 4 millennia. But it takes on an entirely different hue altogether when a state, or a set of states, gang up on another, deny access to capital and/or technology on frankly flimsy grounds. It becomes almost a buccaneering loot {from our perspective} when you fight the ability of the state to provide for its own people as it may impact your profit lines. And that is precisely what the entire Farm Subsidy, Green House Gases, Pharmaceutical drug battles are all about.
WHAT HAS CHANGED?
I argue that nothing has changed, precisely nothing. What is in evidence is the mere continuance of the trendline I have pointed out above, with clear proof and precise examples. Why, then, are we seeing the updates, events, news and happenings that we noticing nowadays? This is what bears a closer examination, not the bugbear of so-called protectionism! What we call protectionism is simple Human Nature; no point crying about it. It is basic nature to protect your turf; it may not be fair – but this is the way it has always been since we entered Dvapar Yug!
What has changed is that rising prosperity in the developing nations, rising educational levels and favourable demographics combined with cheaper factors of production – especially labour – has led to two movements. First, an emigration of educated and/or talented people to the West, who come with significant economic benefits in terms of lower wages and a harder work ethic; and two – stagnancy in the West as compared to rising lifestyles & infrastructure in the East has bridged the gap somewhat, at least in pockets in some developing nations, leading to other factors getting highlighted.
These factors are, simply, first the markets, wherein the size has made them attractive; and better facilities and educated workers meaning a lower cost of production at a comparative quality. Obviously, in a finite system, if one side manages to attract capital through superior factors of production, it is going to fuel political, economic and cultural undercurrents in the other side. For, at least temporarily, and in some products – centers of jobs are going to shift, and a cultural & demographic change in worker profiles is going to happen in the target economies of the new world.
This, combined with the inability of these economies to create new jobs for the lost ones, and a high burden of social expenses by virtue of the freebies the population in these nations enjoys – creates a whirlpool. These factors taken together are bound to fuel short-term tensions and rises in protectionism. What can we do? Wait it out; hope for better sense – and play sound policies, that focus on the factors of production, making business easier – and consistently pointing out how these tectonic shifts in the past 2-3 decades have had benefits as well, even for the Developed World; that is a story that badly needs to be told, and not just in Indian Media – but in World Media. We have been focusing only on one side of the coin; has anyone systematically tried to point out the benefits flowing from these tectonic shifts that I pointed out above? It needs to be done, and now.