Monday, February 23, 2009


Everyday we are receiving bad news on increased unemployment in our country. The official version is that India is not passing through deep recession. Yet during last six months educated job loss was reported to be five lakhs. No new employment has been created in last six months too in most large private sector enterprises. This is absolutely very scary situation. Many fresh graduates who had campus interview in 2007 have not yet been absorbed. They are perhaps going to be called to join in now. The boys who were interviewed in July 2008 still don’t know when they would be given the posting. The student of 2009 batch are feeling frustrated completely. What would be their fate?

The uncertain future awaits fresh graduates in IT, sectors mainly. The automobile sector has also stopped taking fresh graduates. The Steel industry, The cement sector have not also recruited any more. I checked up with a HR executive of Microsoft, based in Bangalore, whether they have been taking person in SAP segments. (Generally SAP segments are still vibrant world over). He replied to me that there is a frieze on most new appointments. Under such circumstances who can empower the young job seekers?

The frustration of Job seekers have gone so high that some of the boys have raised their voice in protest against recruitment of cricketers by industrialists and by film stars turned businessmen with very high salary involving foreign exchanges. In Japan, young job seekers are organizing protest rally by throwing fist in open air against vulgar display of over spending by businessmen and by celebrities. These are of course sign of frustration. The time has come for society to note these signals before it is too late. The question before us is how to stop frustrations of young job seekers?

Some of our friends discussed the matter and evolved a consensus that may be worth mentioning. I did receive a suggestion from a friend of mine. It is a fantastic suggestion. All the companies who had taken campus recruitment program and had already issued appointment letters should sponsor the candidates to a post graduate course as they have not been able to provide them the jobs so far.. The companies can negotiate with a few technological universities in each region to impart one year's technological and business oriented course and train those appointees. This could be equivalent to one years post graduate course in line with the Sloan school of Management's model.

The course content can be similar to the MIT's program and can be called Master of Techno-management. This could be achieved through payments of half the salary which the corporate promised to students in campus interview. This program would save the money for the company, but prepare the appointees to accept greater social challenge in future. The boys would have fulfillment of acquiring knowledge instead of frustration and of course a degree, at somebody else expenses.

Some of the Indian employers have developed maturity in handling potentially-messy situations in a country where layoffs are still frowned upon. They were making sure the retrenchment process can be as painless as possible. The idea is to hand-hold these employees while helping them to get jobs, so that they can walk out of the door with their head still held high.
Software giant Cisco was the first to show the way in 2001, after the tech bubble burst. The company allowed employees to take sabbaticals while they were paid one-third their salary. During that time, they received employee benefits, and access to training and continuing education. If jobs opened up, these employees enjoyed preference. Thus Cisco saved money, talent and - more importantly - its reputation as an employer of choice. So, Cisco is now world’s most preferred company to work with.
Our society has also a role to play. During the time of such economic depression rich people needs to stop showing off high spending, throwing lavish parties and vulgar display of wealth. The Government needs to take up construction projects, Road buildings and sponsor specialized training courses for a year in local MBA institutes for qualified personal that got job but could not join. It would be small money compared to reputation they might earn by sponsoring educated unemployment.

Tuesday, February 17, 2009


The interim Budget presented in the Indian Parliament was a lack luster budget in recent times. It did nothing to assure anyone any way as to how financial crisis facing the country’s economy would be met. It was merely an excise where statement of account was placed and expenditures were accounted for. Even from where revenues deficit would be met were not explained in details. It also did not specify how new urban jobs would be created to push back unemployment (though allocated 1,31,000 crore for rural sector) situation of the country. The interim budget was a copy book exercise that needs to be followed in normal circumstances. But, is this a normal time? The country is faced with turmoil when business growth is slow and unemployment is mounting and the non-creation of jobs have been creating havoc..

Pranab Mukherjee's speech was almost so uninteresting that half of the Treasury benches were found napping. A few MPs were almost heard snoring while budget speech was read out. There was neither high applause nor booing by the opposition bench which is usual during the budget speech.

This was perhaps first budget in the years where there was almost no change in tax proposals. The Government neither gave any tax concession nor imposed any tax. Naturally corporate sector was not happy as it was expecting withdrawal of tax surcharge. It also expected some concession to Realty and automobile sector. The government felt convinced that nothing needs to be done presently. But it was Pranab Mukherjee who indicated that there could be a third stimulus package for revival of economy further.

The gross tax revenue of the government during 2008-09 is likely to fall short by about Rs 60,000 crore (Rs 600 billion) over the budgeted estimates, as per the Interim Budget for FY'10 presented by acting finance minister Pranab Mukherjee on Monday. It is sad that fiscal deficit is growing in alarming pace and further rise in deficit would be dangerous to the health of the economy.(Rs3,32835 crores deficit in 2009-10)
The shortfall, according to Mukherjee, was 'on account of the government's proactive fiscal measures initiated to counter the impact of global slowdown on the Indian economy.' But there was no indication how this gap would be met. Despite a fair degree of hyped up expectations that had built up in the media, the actual budget was a non-event.
Needless to say, the budget contains nothing that would directly put more (or less) money in anyone's pockets because it was not a budget at all. Any expectations from this event were misplaced. It is a fact that for almost the first time in living memory, many of us will be paying less tax not because tax rates have been lowered but because our real incomes would be lower. (Inflation is expected to shoot up)
Could the government have done more in this interim budget? Normal practice says that it should not have. However, these are obviously not normal times. Dhirendra Kumar, eminent Financial and Investment expert questioned rightly that why couldn't politicians of the major parties have sat down together and produced a sort of a consensus rescue package that could have gone beyond the constitutional proprieties that bind a vote on account? The answer is that because they are all in election mode. The Share market reacted sharply and went down by more than 300 points of sensex.
Mr. Mukherjee's speech in parliament was little more than the second speech of the election campaign, the first one being the railway budget speech. All of them-government and opposition alike-have gone into full election mode and clearly don't care if the country's economy marks time till about June or so. . In the middle of the worst economic crisis in living memory, our leaders have found more important things to do. How they are going to create more employment was not disclosed. Neither had they tried to empower the youth who are facing bitter joblessness in recent time.
Based on the things Mr. Mukherjee said today, it is difficult to forecast how the real budget will affect the savings and tax situation of the average Indian. He did say at one point that 'In the days of financial stress, tax rates must fall and our ability to pay taxes must rise.' We could not understand what this means . How must our ability to pay taxes rise in days of financial distress? Perhaps it's just an off the cup remark of an astute politician whose heart is not in his job anymore.
The interim budget did nothing, which was expected. Perhaps the political environment is too busy in their own planning and have no time to empower common people to face the crisis the country was facing due to financial downturn


Monday, February 16, 2009


The 2009 is going to be a difficult year, despite optimism from Government of India. All indication points out to a tough time. Of course, it is true that tough time does not last forever but tough people do survive always. This is the time for survival. Almost all the developed countries are reeling under crisis. America is going through a most challenging time. The President Obama has convinced his congress for approval of stimulus package yet the very foundation of capitalism is under pressure. We would not be surprised if within ten years the condition of capitalism takes the route of Russian Socialism. Unemployment situation of America is mounting up. The growth of GDP has turned negative. Lots of educated persons have become jobless. The president is publicly criticizing corporate Houses for payments of fat Bonus to senior employees when large numbers of people are in distress. The condition of Europe is even worse. The expert opinion predicted that some European nations may experience the condition of poverty after long years. With such a condition of developed countries, export from India is going to be badly affected. Unemployment and job loss would be inevitable in our country. What is to be done now?

In India, of course, the conditions are not so depressing. Yet the global economic turmoil will affect Indian citizens too. There would be no bank failures, a few industries might close down. Unemployment will rise; export sector would no longer be a money spinner. Indian industry shall have to depend on the internal market. Since domestic market is large it would support those Industries which produce commodities of mass consumption. Investment would provide low return for another few years. The economic growth would fall below 7%. At this moment most pressing need for middle class would be to conserve money. How to do that?

It would be foolish to take out invested money for that would mean definite loss of wealth. A day would come when market would jump on its feet and people who have patience would reap the benefit. This is the time to conserve money by minimizing avoidable expenses. This is the time for middle class to be prepared for difficult time for another three years by becoming frugal in their habits. Don’t buy expensive Cars, unless it is most essential, don’t take luxurious trip for sightseeing. Check the habit of eating out and throwing lavish wedding parties to show off. Do everything with moderation. You would need money to keep your body , soul and emotion together. Do we have to stop investing?

Yes, for the time being keep away from bulk investing in equity. Those who have continuous flow of money like that of Doctors, advocate, creative people and self employed need to conserve money in FD of good bank and also in Arbitrage fund. For taking IT (80 C) benefits invest in PPF, Bank Fixed deposit and senior citizen scheme. An investment in good ELSS fund could be made through SIP only by younger investors. No lump sum investment should be invested in equity. If you must invest then do it through SIP. Buy Nifty & Gold ETF. You would need money for food, children’s education, health; payments of property tax or rent and to buy cloth etc. (avoid buying unnecessary expensive garments and shoes). During the period of depressing economic condition the best vocation remain connected with Health & food industry. Most of the time food & health product defy down turn. Perhaps all of us remember that Lee Iacocca’s father advised his son to join butchers trade when he lost his job as that was depression neutral area.
The effect of depression would penetrate our country suddenly. This is the time to forewarn middle class to conserve resources. Some time they behave like an Ostrich. In fact Indian middle class are exceptionally brilliant but most of the time they remain engrossed in day dreaming. Once they are awake they generate tremendous ability to protect themselves from any onslaught. Many people asked when the situation would improve ? It is difficult to predict. However, according to a proverb tough time doesn’t last forever, but tough people do. Let us hope 2012 would be the year of bright sunshine.


Wednesday, February 4, 2009



This is the time for Tax Saving device. The most employees look for the best tax saving devices during the month of February. In corporate houses employees need to submit their tax savings options to the account department who in turn calculate the tax liabilities of staff, workers and executives for proper deduction tax from their income. As February approached I started receiving calls from the readers of our column as to what would be the best tax saving devices during this fiscal. It is a genuine query and needs to be addressed dispassionately.

The total limit of tax exemption under section 80 c is Rs. one Lakh only per annum. All the employees would get the benefit of provident fund deduction from its employers. After receiving the benefit from Provident fund the gap shall have to be filled up by subscribing to other tax saving devices. The tax saving devices include, among others, PPF, Life insurance, ELSS, NSC certificate, ULIP, Senior citizen’s fund, bank fixed deposit and post office FD.

My personal preferences are Insurance and PPF. But here is a catch. Both Insurances and PPF do not really suit senior citizens. I have advised some of my senior citizen friends to subscribe to Bank’s fixed deposit or in SCSS for five years to avail the benefit of 80 C benefits. Some of my friends are holding PPF even after expiry of mandatory 15 years period. These friends were advised to put their money, for 80 c benefit, in PPF account only. However only RS. 70,000 can be kept in PPF. Then where to keep the balance amount of Rs 30,000 to enable them to avail full tax benefit? For senior citizen best bet is to keep the money in bank’s FD or SCSS for five years, in case he has no PPF account.
NSC is good but investors have to pay tax on interest unlike PF, PPF and ULIP. So it emerged that the persons who have existing PPF account they can put the money there. It would help them greatly for there would be no tax on interest and in case they need money in emergency they can take it out too, after completing seventh year.

I asked a few young friends as to why they did not like to put money in ELSS? They replied the stock market has crashed and they felt that was not the time to buy ELSS. I explained to them that the best time to buy ELSS was now, because the market has crashed and the NAV (at which price they would be able to buy) is the lowest. A few economists friend of mine calculated the compounded annual growth returns (CAGR) of both ELSS and Fixed Income instrument. It was found that in a period of five years compared to fixed income instrument ELSS have given better returns in spite of the great financial downturn. One of my intimate friends subscribed to ELSS in 2003. He confirmed that he is still in profit despite the fact that Share market came down to 8900(Sensex) from 21000. Yes, his investment in 2003 is still in profit... The share market never remains dormant for a very long term. The world had seen worst financial disaster in 1932 yet it had survived the depression. The financial mayhem has brought in recession surely but it is nothing compared to experiences of the great depression. American people did not even have enough to eat then. The situation is bad even now but is expected to improve by 2012.

It would be worth mentioning that the return of last five years in ELSS is much better than fixed income instrument. Magnum Tax gain’s return is 27.25% and Sundaram Tax gain’s return is 22.59%. HDFC Tax saver gave 20.56% return. Whereas the highest return in fixed income instrument like Bank FD & Senior citizen scheme gave 9.31%& PPF and NSC gave around 8.16%. Younger employees do not need to be afraid of. To me ELSS is the best Tax saving instrument for younger investors. For senior citizen, Bank FD, SCSS would be better if no valid PPF account is available.


Monday, February 2, 2009


Many people have written to me asking how to face job loss and salary cuts during the present turmoil.My answer was to develop patience and re-train yourself in specialized sector. Negotiate with your employer for fare cut in salary that should be restored later when market recovers. Don't leave job in anguish now. Meditation should be practiced to keep cool.

The economic condition of most developed countries have gone from bad to worse during the month of December. It was thought that during 2009 the effect of down turn would be much less severe than before. But suddenly the economic depression has touched Canada also which was surviving so long. During the last week of January the job cuts in most of the developed countries have brought cascading effects in our countries too. The news of delay in the fresh appointment in IT sector has unnerved the fresh graduates in our countries too. How to survive the economic depression?

This is a million dollar question today. During the last week I was approached by many young graduates seeking advice how to survive the job loss, pay cuts .The most graduates asked me when the situation would improve.

Let us face the reality now. Though neither a single bank failed in our country nor any manufacturing units have been closed down due to the effect of slow down of the demand yet economic growth of our country has slowed down. Our apprehension of poorer growth rates was forecast in this column earlier, despite optimism of the then Finance Minister of India. The finance Minister felt the growth rate would be 8% whereas we felt it could not be more than 6.7% to 7%. The RBI has recently declared that economic growth of the country might slow down by one percent i.e. to 7%. We still feel it might further go down.

In case economic growth rate touch 6.5% it would take time to revive the economy. Presently demand for steel has gone down. There is a possibility that demand for automobile would go further down. The retail sector, which remained vibrant, has already started cooling .Due to depressing effect of construction sector the demand of cement, stone, sand and iron have touched a new low. But most effected areas were IT sector for most of the work of this sector came from abroad. Since Multinational companies have started taking precaution in selection of vender's’ lots of national and provincial IT companies have lost orders. This has resulted in recruitment of lower numbers of fresh technologists. Let us face fact that down turn would not suddenly get reversed and employment would not be generated quickly. What fresher should do now?

My earnest suggestion is not to loose cool. This is an extra ordinary situation and more boldly the situation could be faced better would be the result. The survival lies in the action of getting themselves retrained in various specialized stream. Recently a fresh graduate engineer asked me that he has a job offer since June 2007 in a Multinational company. He has received the appointment letter with full pay scales and perks etc. But have not yet received communication for place and date of joining. What should he do now? He has scored 90.7 percentile in CAT examination. Should he wait indefinitely for the job or he needs to join the Management course in Gurgaon? My suggestion to him was that he should join the Management course instead of waiting endlessly for the promised Job. His situation was much better to be answered. But there are IT specialists who have been told by their employers that organization was finding it difficult to continue operation. They expect some of the employees to accept 25% less pay than what they are getting now. What should be done? This question was asked to me by a number of persons. My response was under the present circumstances it would be better to negotiate, with employer, and accept the pay cut. It would be unwise to resign and look for other avenues now. Almost all sectors of the economy have been affected except Government sector. The lucky were those who joined OIL India or ONGC last year refusing higher compensation from Giant IT companies. The government sector is recession proof. Instead of waiting for the jobs young graduates should prepare for All India services. Should Government do something now? Yes, Government should give booster to infrastructure development, computerize government pay rolls and provide booster to surface and river transport facility to generate employment for educated persons. The training and retraining of employees would be imperative either by employers or through self motivation. Educated bright graduates might look for job in defense establishment like that of engineers and Doctors and land record officers also. The fresher needs to break the convention. They should start looking for jobs in new greener pasture.

I have received a suggestion from a friend of mine. It is a fantastic suggestion.All the companies who had taken campus recruitment program and had already issued appointment letters should sponsor the candidates who could not be provided with the job so far. The companies can negotiate with a few technological university in each region to impart one year's technological and business oriented course and train those appointees whom appointment letters were issued but could not offer job so far. This could be equivalent to one years post graduate course in line with the Sloan school of Management's model.

The course content can be similar to the MIT's program and can be called Master of Techno-management. This could be achieved through payments of half the salary which the corporates promised to students in campus interview. This program would save the money for the company, but prepare to accept greater social challenge in future. The boys would have fulfillment of acquiring knowledge instead of frustration and of course a degree, at somebody else expenses.