The Parallel Economy

INTRODUCTION

It is believed that the second most populated country in the world with around 1,150,000,000 (1.15 billion) people, India is growing in stature amidst the economies of the world. The following figures will also give a normal Indian some causes to smile.
GDP (purchasing power parity): $3.57 trillion (2009 est.)
GDP (official exchange rate): $1.236 trillion (2009 est.)
Source- https://www.cia.gov/library/publications/the-world-factbook/geos/in.html
But the truth is that the Indian economy is today witnessing a serious crisis. Unemployment, financial scams, political chaos and sick companies are the result of this unchecked phenomenon that has mushroomed under successive Congress Governments and has already done more harm than centuries of Muslim or Christian domination.
Today India is also seen as a potential world leader based on its thriving economy. But there is another economy thriving in India which everyone should be aware of. This economy is known as “The Parallel Economy”

THE PARALLEL ECONOMY:
A parallel economy is so called as it disregards the rules and regulations that ‘white’ businesses follow. The components of the parallel economy are numerous. Tax-evasion, Smuggling, Bribe-Taking, Foreign-currency racketeering are some of the more prominently visible and talked about forms.
While there are no authentic figures about the black economy in India, according to the Professor of Economics, Jawaharlal University, Arun Kumar, who has written one of the most authentic books on the subject, ‘The black economy in India’, puts the figure at around 40 percent of the GDP.
Some Stats: According to the latest estimate of Central Statistical Organization (CSO), the size of the Indian economy is around Rs. 61, 64,000 crore. So the size of the black economy comes out to be around Rs. 25, 00,000 crore or around $500 billion.
Estimates by eminent economists reveal that India’s parallel economy has risen from a mere 3 percent of the GDP in the mid-50s to around 50 percent today. The dimensions of this growth of corruption and generation of black income in India are indeed mind-boggling. The black economy is now about 50 per cent of the GDP or roughly Rs 30 lakh crores annually. This data is enough to shock anyone.
The black economy is made up of two constituent activities:
• Legal activities that are not reported to the tax authorities and the income from which goes untaxed and unreported
• Illegal activities not reported to the state (and, therefore, not taxed).
All this ill-gotten wealth of ours has been stashed away abroad into secret bank accounts located in some of the world’s best known tax havens such as the Swiss banks.
Let us look at the details of bank deposits in the territory of Switzerland by the nationals of the following countries in 2006:

Top five

India—- $1456 billion
Russia—$ 470 billion
UK——-$390 billion
Ukraine- $100 billion
China—–$ 96 billion

India with $1456 billion or $1.4 trillion has more money in Swiss banks than rest of the world combined, an amount 13 times larger than the country’s foreign debt. If this huge amount of black money property comes back to India; the entire foreign debt can be repaid. After paying the entire foreign debt, we will have surplus amount almost 12 times larger than the foreign debt. If this surplus amount is invested in earning interest, the amount of interest will be more than the annual budget of the Central government.

Courtesy: Santabanta.com

THE GOVERNMENT’S APPROACH:
• Recently, due to international pressure, Swiss government agreed to disclose the names of the account holders only if the respective Governments formally asked for it. Indian Government has not asked for the details.
• The German Government once bought a disc containing the names of people holding illegal bank accounts in Liechtenstein in 2007. They offered to share the disc for free with all the governments whose nationals’ names were in the disc. The governments of the US, UK, France immediately took the data and started prosecution but the Indian Government refused to accept it for two years—perhaps to enable the corrupt to escape
• Many committees have been formed but with little or no result more than forty Controls like FERA, MRTP, small scale reservations and licensing have been diluted or eliminated. Direct Tax rates have been reduced drastically. Voluntary disclosure schemes have been tried repeatedly but there is little dent on the black economy.

THE NEED OF THE HOUR:
The above facts should be enough to awake every Indian. Now looking at all these, the question is: what is there that can be done as a solution? In such a scenario it is only public pressure on the Government from every corner of the county that can push the government to do something seriously. We need to start a movement to pressurize the govt. to do so!! This is perhaps the only way we can get back the money which can be better utilized for the welfare of our country.

REFERENCES:

http://hindustan.org/forum/showthread.php?p=6886

http://www.internationalreporter.com/News-202/india-and-8217-s-black-economy-indians-hold-1-trillion-in-foreign-banks-illegally-.html

http://www.mainstreamweekly.net/article2266.html

http://www.economywatch.com/market/market-types/black-market.html

http://economictimes.indiatimes.com/news/economy/finance/India-loses-Rs-10-lakh-crore-from-black-economy-every-year/articleshow/5710210.cms

What is the hyped CFA all about?

When the world slips into recession, it is the financial sector which usually suffers early and for long. From the Wall Street to the Dalal Street, the highly paid professionals and the back office workers lose their jobs at a rapid pace. While economists’ debate whether U.S is in recession or not, the investment talent is sending a clear signal. As Wall Street sheds jobs, the CFA Program gets popular. Even the last two times when U.S. had a downturn in the economy in 1990-91 and 2001, the registration for CFA shot up.

CFA Exam is conducted by CFA institute based in U.S. CFA is an internationally renowned exam; perhaps becoming a Charted Financial Analyst is the most prestigious designation an investment professional can achieve. Through rigorous examination and a four year apprenticeship, CFA screens the brightest of the talents and those who pass all these hurdles acquire the CFA Charter Holder. Only about one-third pass the initial Level I Examination and even much lesser succeed in the all three levels of the examination. Despite this discouraging statistics candidates are still flocking this examination. They realise the value of the course because they have observed how the lack of a CFA charter has put them behind in the competition.

For those who are considering a career in investments it would be confusing whether to obtain MBA or CFA designation. Both have their advantages. In MBA, the career option is diverse and open whereas CFA is more specific. So a CFA along with a MBA helps get an instant recognition in the industry and to grab the desired career in finance.

So what makes the candidates apply for this program?

Apart from the traditional answers such as the strong skills and knowledge, the CFA provides a Global Recognition and is also the most widely and respected investment credential in the world.

It gives a career advantage; Employers recognize the CFA charter as the definitive standard to measure the competence, integrity, and dedication of serious investment professionals.

Earning the CFA charter places you in the company of an elite group of nearly 90,000 respected investment professionals. Access to their collective expertise, networks, and resources is an invaluable asset.

The Top 10 Employers of CFA Institute Members are Bank of America, Citi Group, Credit Suisse, Deutsche Bank, HSBC, JP Morgan Chase, Morgan Stanley Smith Barney, RBC, UBS and Well Fargo. The CFA holders are working in various designations and various operations of these companies which are shown in the chart.

Percentage breakup of the positions hold by CFA Charter Holders

Source: CFA Institute

So the CFA charter provides you with a strong foundation for a variety of career choices in the investment profession. If you’re interested in portfolio management, investment research, advisory services, or investment banking, you will benefit from a CFA charter. Employers and media around the world recognize the CFA charter as the standard of professional excellence. With such widespread recognition, CFA Charter Holders earn a significant competitive advantage for international employment.

Workshop on IT and Role of MBA in an IT firm

Workshop on IT and Role of MBA in an IT firm

IT plays a very important role in today’s glocal economy. IT is the growth driver both directly and indirectly. The workshop on Data analysis and role of MBA in IT was a perfect platform for learning and unlearning for the budding managers in DoMS-NIT Trichy. The first in the lecture series was delivered by Dr. L.S Ganesh from DoMS- IIT Madras. The style was unique without the aid of any presentation tools and strong reliance on mind techniques. His penchant for systems was very much infectious. The lecture dealt on the contexts of systems in life like me alone, me in home, me at work and me in public.


Dr. LSG’s flamboyant style

Dr. LSG strongly emphasised that leaders are never created but they are nurtured. Intelligent scepticism is a trait required by managers. Apart from Dr. LSG’s vast knowledge in systems, his take on ethics was formidable. He professed that the violation of ethics can be divided into sin, mistake and error. Errors can be divided into minor errors and major blunders. They are performed without the conscious knowledge of the individual. Mistakes are classified as small mistakes and big catastrophes. Finally, sins are committed with the conscious knowledge and an intention to deceive and they are classified as ordinary and cardinal sins.  Violation of restraint is a sin.

Ravi Vishwanathan, Global Vice President, Telecom Services, TCS was the next distinguished speaker. His personal experience sharing was a practical way of teaching via example. His leadership qualities established TCS operations in Scandinavia. When a well known IT and hardware provider quoted more than ten times of TCS, scepticism was evident in the clients. Questions were raised on the level of quality interactions between the employees of TCS and the client and on the level of quality deliveries. Ultimately after TCS  received the order it not only captured the minds of the clients, but also established Indian flags in the Scandinavian regions. TCS became the first Indian service provider to start operations in this region. He shared the parable of the sadhu, which had application to our daily lives. In our daily lives we are often in dilemmas between performing different tasks. Dr. Kannabiraman was thankful for the live experience sharing by Mr. Ravi.

The session on “Role of MBA in IT” was a lecture which had all eyeballs rolling. Mr. Namby Dhandapani, Director, Business development, Cognizant was the speaker. The lecture dealt with different business models. Software as a service, commonly known as SaaS, is a trend which is evident in the success of websites like salesforce.com. IT firms are moving towards a more cost effective business model. Outsourcing is an outdated model and will be replaced by more competitive and cost effective models.  One of these models is “Cloud computing” or simply “cloud” which is the future of IT services. In this new model, the entire burden of maintaining the infrastructure like servers has been taken off from the users. The complete infrastructure will be hosted on the “Cloud” and they can be consumed on a “pay per usage“ basis. Also the cloud servers can be hosted and accessed from anywhere in the world. Thus it would not face the negative criticism that Outsourcing faces today.

The workshop on IT was a platform for confluence of ideas and minds. It was a ready mix food for thought for the budding managers in DoMS-NIT Trichy. Students were appreciative of the efforts taken by Dr. Kannnabiraman, Dean, Research and development, NIT Trichy and Professor at DoMS-NITT.