Speaking at an interactive session organised by Moneylife Foundation in Mumbai, Prof R Vaidyanathan said women savers and the so-called 'unorganised sector' are keeping India on the growth track and not the large corporate sector or foreign investments
Indian women are responsible for the country's growth with their humoungous ability to save money at all times. Similarly, contrary to views expressed by experts, India's growth is primarily driven by partnership and proprietorship firms and not the corporate sector. And we need to respect these women savers and the so-called 'unorganised sector' for keeping us on the growth track, says R Vaidyanathan, the professor of Finance at Indian Institute of Management, Bangalore (IIM-B).
He was speaking at an interactive session organised by Moneylife Foundation in Mumbai. Prof Vaidyanathan, who has coined the term 'India Uninc' for the largest component of the Indian economy comprising small entrepreneurs, households, said, the arguments that the multi-national companies (MNCs) bring in ‘funds, efficiency and cost effective solutions are totally a mirage and lead to failed models.
"They (MNCs) access funds at a low cost from overseas and even from our domestic financial institutions by brandishing their parent company’s ‘letters of comfort’, which fetch them funds even below prime rates. While large corporates obtain large lines of credit with highly suspect credit appraisals, at prime lending rate (PLR) or base rates, soft loans and exotic facilities, a poor flower vending girl cannot open a no-frills account. To exapand her business she may be borrowing from a usurious money lender at 50%, or getting Rs45,000 up front for a loan amount of Rs50,000. More than 70% of the retail working capital requirements come from such non-bank sources," he said.
Non-corporate sector –consisting of partnership, proprietorship and household enterprises constitute nearly 50% of Indian GDP while contribution of corporate sector or companies is just 15% of the GDP. The share of foreign direct investment (FDI) and foreign financial institutional investors (FFII) in Indian investment is not more than 7%. This means, 93% of the investment in India comes from domestic savings, out of which household saving contribute almost 80%.
These savings mainly come from the household sector; the role of institutional capital is limited. Explaining the reasons for such a large household saving, Prof Vaidyanathan said, "There are four basic reasons why Indian households, especially women save money. First is for the old age. Then, there are costs involved with education, healthcare as most of these people have to spend money from their own pocket. Indian 'sanskar' also plays a vital role in savings. This includes handing over wealth to next generation."
"Day by day education is becoming more expensive. In fact, you need more money to secure admission in under KG or junior KG than higher education. Not to mention the 'special terms and conditions', like mother should be graduate or post-graduate and the family must be speaking English at home etc., implied upon needy parents," he said.
Poking fun at education practices and loans, the Professor said, "I often argue with banks that they should provide such loans to parents seeking admission for their kids in under KG or KG classes rather than IIM or IIT. I mean, what is the point to provide loan for second and third floors when there is no money to build a foundation!"
According to Prof Vaidyanathan, another most important but hidden reason for household saving is corruption or bribery. "The phenomenal bribes extorted by police, municipal babus and their minions are nothing but ‘organized dacoity’ and there is no escape from this, for businesspeople. In fact, small vendors and shopowners have to pay as much high as Rs20 on a daily income of Rs200 as bribe or hafta. That is 10% of gross income of these people."
World economy and India
Earlier, speaking about the world economy, Prof Vaidyanathan said, based on the purchasing power parity, the share of emerging and developing economies is increasing, while the same for developed countries, like the G7 economies is falling.
According to The World Economy: A millennial Perspective—Angus Maddison OECD Development Centre Studies --2007, till 1820, China and India contributed more than 50% to the world GDP. However, after that, the share of both these contries started to fall while contribution from Western Europe, USSR, US, Latin America to world GDP increased till 1998.
But all these developed economies are burdened with huge debts due to non-saving culture. While India's overall debt percentage of GDP is 122%, the same for Britain jand Japan is over 500%. The US (289%), Germany (287%), South Korea (315%), France (349%), Spain (366%), Italy (310%), Brazil (494%) are the other countries from 'developed world' that have huge debt to GDP ratio.
One of the major reasons for such kind of huge debt is the high household debt percentage of GDP in countries like Britain, Canada, US, South Korea and Spain.
According to Prof Vaidyanathan, another issue before these developed world is dwindling birth rate. Almost all these countries have a population that is growing in age or retiring from active earning. At the same time, there is no replacement or same numbers are not being replaced by new work force. This is leading to migration and then there are other issues emerging related with this.
Quoting The Economist, he said, during 2010, 40.8% of all births in the US were to unmarried mothers. What was illegitimate has become new normal. In UK, there are more households with TV sets than fathers. This means, sovereignty of family is disappearing and is being replaced by single parent, mostly women, family.
Another issue in these developed countries is rising unemploment. "Spain’s jobless rate for people ages 16 to 24 is approaching 50%. Greece’s is 48%, and Portugal’s and Italy’s, 30%. In Britain, the rate is 22.3%, the highest since such data began being collected in 1992. The comparable rate for Americans is 18%. and most of the unemployed youth do not have skills. Such scenario definitely create social problems, the Professor said.
Importance of India UnInc
According to Prof Vaidyanathan, the growth of the economy in the nineties should be attributed to the partnership and proprietorship (P&P) firms in service activities and not due to the reforms carried out by the government or the miniscule contribution of the corporate sector, but ironically this remarkable contribution of the P&P sector has not been documented and appreciated.
He said, unfortunately, the governments control and regulate an economic activity of these P&P firms or the unincorporated economy that it does not understand and tax it, if it is growing fast. This gargantuan appetite of the government goes against the grain of our civilisation ethos and negates the entrepreneurship of the non-corporate sector designated mini, small and medium enterprises. Its contribution to national savings hasn’t received the recognition because the aberration is due to it being wrongly labeled “household sector, though many of them notch turnovers running into hundreds of crores. The concept of capacity is cosmic and unlimited unlike western notions of limited capacity and possibility of increasing output only by increasing capital, Prof Vaidyanathan added.
FDI in retail trade- facts and fiction
Dissecting the myths and reality about FDI in retail trade, the Professor said, the trade is dominated by P&P firms. "The retail revolution that is applauded by planners, encouraged the government and eagerly talked by experts but not many seem to be worrying about the millions of retail traders, who will get marginalised. There is not much debate, let alone informed debate, among academics and other policy-makers about the far reaching implications that the entry of global retailers has on our economy, where the level playing field argument is meaningful and significant too," he said.
Wholesale and retail trade contributes 16.6% to India's GDP, which is next only to agriculture's 17.5%. Livelihood of 30 million, including children and others, is involved in retail trade. About 120 million will be directly impacted by the so-called retail revolution (read FDI in retail), when real estate sharks will corner prime land to construct large malls by evicting retailers, Prof Vaidyanathan cautioned.
He said, "Many householders will then create small retail shops inside their homes with the help of surplus self-employed in-house labour with mini refrigerators to store just-in-time stock of cola and bundles of toilet paper rather than a major retail revolution with the razzle-dazzle of shopping in comfortable surroundings, computer generated unreadable printouts as a panacea for all problems. The arguments that the new outlets will remain open for longer hours unlike those in the West where they close early and on Sundays falls flat as the local next door mom-n-pop kirana shops manned by the efficient owner knowing and his family the customers’ tastes, requirements, price considerations offers free home deliveries and also extends credit. He opens at 7am and closes at 10pm every day for 365 days, but labeled ‘unorganized’ by our experts and the national income data to diminish his contribution. The customers don’t need to blow up fuel to drive miles away to go to the malls. The footfalls in these shops cannot be measured using western models [since there is no place to keep anybody’s foot inside his shop!] and so he is derided and abused. It is like clubbing housewives with prostitutes in our Census data to show them that they are involved in ‘unproductive’ activities."
He said, Indian laws are being amended a thousand times to facilitate the grand entry of global malls and hypermarkets, some to permit the retail giants to procure directly from farmers at the agricultural market yards and not to trade in commodities, where transparency is doubtful. Indian brands like Reliance have encountered opposition in states like UP. In India, with mounting pressure presently 100% FDI is permitted in single brand and up to 50% in multi-brand. Wal-mart faces US Congressional investigations into allegations of bribery and corruption in India. Today, it is a hot election issue with parties like Bharatiya Janata Party (BJP) and Aam Admi Party (AAP) stoutly opposing the entry of retails giants in India.
Prof Vaidyanathan said he considers these economic constraints imposed by the West to be terminological terrorism mouthed ad-nauseam by economists and policy planners without understanding its implications, they want to open it up to global sharks in the name of liberalisation and kill the fast growing, productive, efficient and effective retail trade. “The sooner we strengthen our small business, the better for employment and society,” Prof Vaidyanathan concluded.
Unicon Securities' online trading platform is not working. The broker is not honouring payout requests from its investor customers. Even its customer services and offices are unreachable. Is Unicon Securities about to shut its business?
Is Unicon Securities Ltd, broking division of Unicon Group, is on the verge of shutting its shop? It appears that the broker is neither responding to investors’ queries nor paying out money. One of the readers of Moneylife wrote to us saying, “Recently, Unicon Securities has turned contactless. It neither picks up the phone nor answers the email. Its online money withdrawal facility has been closed and only payment is being accepted. I filed a complaint with SEBI but it just forwarded the complaint to NSE.”
“If Unicon Securities turn bankrupt, then how our margin money will be refunded and when it shall be done? Hope demat shares remain safe despite the POA signed. If brokers shall act like this how retail investor shall dare to invest in the capital market? Is opening 3-in-1 accounts with banks is the only safe solution left with investors?” he asked.
As of 31 March 2014, there are 315 compaints registered by customers against Unicon Securities during FY2013-2014 on National Stock Exchange (NSE), out of which 52% are still not resolved.
Many investors are feeling cheated and complained about Unicon Securities on consumercomplaints.in and social networking sites like Twitter.
An investor wrote on consumercomplaints, “I have a trading account with Unicon Securities. From January end 2014, I was experiencing problems with trading which later got resolved but in past three weeks, it has been a dead silence in terms of trading as well as in contacting a single person, either the phones are not working, or they don't get picked. I also have Rs18,000 towards advance brokerage in the account. I am so fed up of evrything, I want my fund and brokerage back. Kindly take up my complain and help me to transfer my shares, my funds, and my brokerage amount.”
Another investor wrote, “I have a Demat account with Unicon Securities, For a few days, I'm unable to make any transaction from my account. I have been repeatedly calling their toll free number but nobody is responding. Also, all branch address and contact numbers provided on their website are out of service or non-existent. I have my money stuck in this account. Kindly help me to recover my money.”
There are similar complaints from other investors who are not able to trade or even withdraw their invested with Unicon Securities. One senior citizen (Age-72) wrote, “Recently, I am facing very bad experience with their (Unicon Securities) service. I applied for the payout amount of Rs1.88 lakh, twenty days ago via proper channel. Surprsingly, it is kept unhonoured and more over there are no human beings to pickup the telephone. I sent many mails to their help desk. That also seems to have been thrown into the dustbin without any reply. I need my money urgently! Kindly help me out.”
The investors, who have their trading accout with Unicon Securities are worried about their investments as they are not able to trade and withdraw money from thier account. The non-existence of its customer services and offices raises a question about what went wrong with Unicon Securities and when will the regulators step in?
Despite incriminating evidence procured through Section 4 of the RTI Act, proving fraudulent deletion of Sharad Phadke’s name from voters’ list in Pune, the police got a counter statement from Election Commission office while refusing to registering an FIR
Sharad Phadke and I, who through inspection of files under Section 4 of the RTI Act, procured documents after spending two long days at the Tehsildar office in his Kasba constituency, revealing the fraudulent procedure adopted to delete his name from the voters’ list, decided to file a FIR for tampering with the voters’ list and illegally deleting his name.
We showed the documents to leading lawyer Aseem Sarode and noted RTI activist Vijay Kumbhar. Sarode stated that, “this case is a pointed one, directly showing the falsification of documents which is a criminal act and merits a FIR. It is a sample case of a possible mass fraud that led to deletion of thousands of names.’’ Kumbhar too mentioned that under the Representation of People’s Act, mischievous and fraudulent deletion of name from the voters’ list amounts to criminal offence and has rigorous punishment. In this case, the Collector, Election Officer and Block Officer are all directly responsible for this criminal act.
After three long hours of waiting, Senior Police Inspector Mr Sawant of the Vishrambag Wada Police Station, called us in and said that he will look into the matter as he had got a written statement from Vaishali Visal, the election office staffer, saying that she has followed the required procedure for deletion of Mr Phadke’s name. I snapped back saying, “how can you ask for a counter statement, with lodging Mr Phadke’s FIR?’’ He said. “just leave your complaint with me and we will do the needful after consulting with the senior. Such a complaint has to be addressed by the Election Commission and not by the police.”
So, how come, Mr Kirit Somayya’s police complaint regarding the same issue was filed at the Mulund Police Station under Section 120 B (for conspiracy?) just a while ago?’ To that Sawant asked us to go outside so that he could speak to his seniors.
After a few minutes, the havaldar came and asked Phadke to put a signature on his complaint, which we had drafted and brought a printout of it. Phadke insisted that he would like to lodge a FIR. So, again we went to Sawant’s office who mentioned that it would be lodged after further consultation with his seniors and he would ensure that the FIR copy is delivered to Mr Phadke’s house. As per law, the police is given 48 hours to lodge a FIR. Sarode has adviced that Phadke sends the complaint by registered post to Mr Sawant with a note saying that despite having come personally, FIR was not lodged. In the meanwhile we insisted that he gives us an acknowledgement on the copy of the complaint, which they did.
After that, I went to the Kothrud Election office where I had asked for details of three voters whose names were selectively deleted. Here too, the documents prove that no procedure was followed. More on this, tomorrow.
Details of Mr Phadke’s documents and procedure of deletion of names from the voters’ list can be read here: Pune voter list file inspection shows deletion is done fraudulently!
I used Twitter as a communication to give a minute-to-minute happening of our visit to the two police stations – first to Narayanpeth Police Chowkey and Vishrambagwada Police Station. Here they are:
My tweets (please read them from below for proper order):
In this country for ordinary citizens at all? Politician @KiritSomaiya 's FIR lodged immediately but Phadke's kept waiting.
Filing FIR of Kothrud documents tomorrow. Until then please pray that I get back my favourite Samsung tablet mobile. So distressing!
I went to Kothrud election office,got documents of 3 citizens. Here too no procedure followed-207of 267 names deleted from 1 polling station
Taking full advantage of 48 hrs stipulated time to lodge FIR, the police registered our police complaint but have to convert it into FIR
Noted lawyer Aseem Sarode has asked Phadke to send the police complaint by Regd post also.
Oh my God - after all that running, I've gone and lost my mobile. It's got left in the rickshaw. Efforts on to trace it
Just now Police Inspector Sawant has accepted Phadke's complaint. Police has 48 hrs time to do the FIR so he will send a copy later.
Now Police Inspector is again calling his seniors. Kya darte hei ye log
Outrageous. how can Pol Insp take statement of election office without taking Phadke's FIR? Shocking. We will wait
P I Sawant says he cannot take FIR and he has already got statement from EO.dat procedure was adopted. i again read out @Dev_Fadnavis tweet
We should all salute Sharad Phadke, a senior citizen who is more enthusiastic then me to file the complaint. He is my hero of the day
Honestly, why can't police take down FIR and then start internal consultations?
Thanks @Dev_Fadnavis forr tweet on @KiritSomaiya police complaint.I quickly showed it to police. waiting since 2.5 hrs at Visrambag pol stn
Election Commissions says sorry and takes responsibility for mass deletions.Not enough. Please announce fresh date before LS election process over
Now PSI Patil has been sent by his senior offucer to find out something before he takes down complaintThey in real fix as we try to fix them
Police at Narayan Peth police chowky say they need to consult seniors. Now we have been asked tk come to vishrambag pol st. Waiting
a SC judgment says if anything so abnormal has taken place CEC shld set aside normal procedures to ensure fair election.
(Vinita Deshmukh is consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)