Economic Stalemate or Capitalists Checkmated, Charles Darwin proved correct

Economic Stalemate or Capitalists Checkmated

HOW LONG CHARLES DARWIN THEORY WILL BE APPLICABLE ? wHAT  IS BEING pROVED?

Save Resources : Water, Electricity, Money.

Extend help and support Govt and follow guidelines.

The question: For How Long RBI and Governments will be able to Support ?

Accordingly , considering that 60% is the actual cash outflow for expenses , (3+2.4+1.2) =6.6% or 7% of cash will be required on an average per month of GDP. Considering 250 billion USD of monthly GDP, country will need approx 15bUSD equivalent , that is almost 1.35 lakh crores per month. Even discounting the same by 30% less, still almost 1 lakh crore per month will be required in worst case scenario. Max 4 months out of CRR balances. As min Govt Expenses and Imports both will also have to be met even to run the bare minimum Power, Roads, Railways, Hospitals, Army, Security and Police. That needs almost 2% and hence more than 1 lakh crore per month will be required.     

Heads of State like Prime Minister's, President's, Minister's, Top 500 billionaires, Tycoons are all in fear and have started remembering GOD and Government.

Suddenly in 3 months from Jan to Feb 2020, lockdown started happening one by one and more than 100 countries are affected.

Almost 300 billion people affected the top and middle class out of 750 billion population.

So how do we see things and what could be in on our way :

  Strengths :

1.  Indian Gold Cult (Distributed Gold in nation) is worth 40 lakh Crores which is almost half a billion USD.

2.  Low Levels of External Debt and adequate reserves of approx 300bUSD

3.  Approx 3 trillion dollars of economy

4.  Deposits have grown at a CAGR of approx 9% and Credit approx at 8%.

5.  India has 129 lakh crores of Deposits and 98 lakh crores of loans. The difference of 32 lakh crores  is by way of SLR and CRR and some additional overnight money , foreign exchange overnight positions.

India has been reducing CRR and SLR over the last many years and private banks are operating on the style of foreign banks where CD ratio are almost 1 or even higher thereby fully leveraged and sensitive to stress of interest rate risk and non performing assets and economic slow down.

They have higher ROA but there risk assessment and leveraging exposes them to situtions like YES BANK episode. Other major episodes have been Global Trust , PMC , Centurion, Bank of Punjab , Dena Bank and few more.

What is happening :

1. International markets falling , increasing premium of credit default swaps, fund raising is NIL, internal cross border and counter party exposures are reduced, trade not happening , LC's stuck, Domestic trade is stuck

2. People are able to use the cash in banks just because of Central banks release of money to banks by reduction in CRR, repo and SLR.

The question that we should be looking at 

1. Industry Contribution to GDP is approx 26%

2. Services Industry contribution is approx 50%

3. Agri Contribution is approx 17%

4. Others contribution are balance.

5. Trade Deficit and non plan expenditure

Considering the following requirement will be as under 

5% average cost of employee in Manufacturing sector 

40% is the average cost of employee in services industry

2% is the average cost of Agri people.

Running of Power Plants even at a capacity utilisation of 60% would need 75000 MW and which will need 1.1-1.6/- per unit (KWH) , Thus almost 200 crores of electricity cost is required per day in the country. With this , in most of the cases, Govt and state electricity boards purchase , and hence almost 6000 crores of cost and 24000 cr per month based on normative bid price per unit. Hence additional requirement of Rs.1 lakh crore will be there to keep the power on in case lockdown continues for 3 months.

  

Accordingly , considering that 60% is the actual cash outflow for expenses , (3+2.4+1.2) =6.6% or 7% of cash will be required on an average per month of GDP. Considering 250 billion USD of monthly GDP, country will need approx 15bUSD equivalent , that is almost 1.35 lakh crores per month. Even discounting the same by 30% less, still almost 1 lakh crore per month will be required in worst case scenario. For How Long RBI and Governments will be able to Support ? 

  

Worst and Biggest tools devised to prove Charles Darwin Right and Correct  : PPP Purchasing Power Parity, Market based Currency Valuation, Futures and Options. Over Dependence and Control.

Overhauling of the way we waste money on arms, security and fighting terrorism , weak is made weaker , poor is made poorer. Rich gets opportunity to buy cheap assets during distress. The Ships have become so large that managing them and controlling them is no more possible.

It is worst and most inhumane that we call ourselves Humans , talk about 'Humane', Humanity,  Social Animal and then we keep on killing each other , creating fear and looting to be 'one up'.

It is high time , that the world should be creating new rules, norms and execution.

No Country can be such inhumane to create so big threat on humanity, world economy.

No one can be allowed to push terrorism and increasing the security cost. 

All Borders are sacrosanct and hence there is no question of war , no nuclear bombs and no tests, no cross border terrorism and hence banning all kinds of wastage and lets work for Green Earth, Sustainability and a Future on which generations will feel pride.

Dinesh Goel