Education & Employment should become Global Responsibility – Inequality a Global Shame

The World has come to understand it is difficult to manage Deflation than inflation. We love to have inflation. Deflation seems to be deadly and the whole world is not happy about oil at 40USD or Copper coming down by 30% in a year or Gold hitting the bottom. The pain of deleverage has hit everybody. Understandably, Country like India, which stands to benefit the most out of falling commodities, remains to be Promising but lacks the performance in terms of growth.

Looking beyond macro economics, lack of education and unemployment are two great factors which are pulling the global economic growth. Irrespective of the size of the economy, the unemployment levels are alarming and most of the economies are understating their numbers. Lack of education and higher levels of poverty in many African and Asian countries add to the problem.

We need to declare Education and Employment as a Global Responsibility. Every living global citizen should have Education and Employment as birth right. People who are below the poverty line who cannot afford to have basic education and thus are not employable should be treated as global citizen and a Global Prosperity Fund has to be created to achieve basic education, skill development and employment for such deprived people.

While it is understandable that every country is working hard towards eradicating poverty and achieving education to all and full employment, still lot of internal pulls and pressures and economic conditions lead to failure on such initiatives.

Global Prosperity Fund will have its corpus built on contribution from every member country depending upon the size of their economy, need for education and employment for its people etc.,

GPF prime responsibility will be to absorb, people BPL (Below the Poverty Line) and those who are economically deprived of education and employment, across all countries and provide them with basic education and specific skills and make them a productive asset for the world. GPF will have to build its infrastructure needed for providing education and skill development and should become a source of supply of productive labor force across the world based on demand – supply conditions.

The objective of GPF should be Basic Education, Skill Development and Full Employment. One of the major problems which the world is facing at any point of time is Terrorism and trillions of money is being spent to combat terrorism. World wide it has been accepted that the major cause for terrorism has been lack of employment.

Once the burden of education and employment becomes a global responsibility, the respective economies can become productive in terms of focusing on development and growth. Every country will be benefitted if GPF can focus and achieve these two critical issues. Then the world will be better off in terms of

·         Inclusive Growth

·         Higher Productivity

·         Reducing Inequality

·         Innovation

·         People Empowerment

·         Higher Per capita income

·         Savings on Social Security

·         Eliminate Demography risk

·         Eliminate Terrorism

While we need to appreciate the roles of IMF, WB and UN on their initiative to combat Poverty and bringing about education awareness, it is not enough and it has been slow in progress. World Bank in its recent report has said it will take up to 2030 to make the world free of extreme poverty. This can delay inclusive growth by another generation.

By making GPF, functionally responsible for bringing full education and employment, we can actually fast track the process and make it achievable before a decade. We can use IOT and digital space to make education reach those who cannot afford and make them be part of the inclusive growth.

Cost of labor has been a major factor which is bothering the economic growth across the world. If we can achieve giving basic education and skill development to deprived people across the world, that will lead to more supply of productive labor thereby reducing the cost of labor.  Also Demographic mismatch can be handled better by bringing equilibrium on people resource across the world.

Enabling every nation to achieve full employment and effective use of human resources can transform the global growth model completely. We can neutralize the effects of Inflation and Deflation with lower cost of labor and higher productivity.

On the one side we will be seeing new technologies, IOT and Automation replacing people on many mundane jobs, education will help individuals at the bottom of the pyramid to look for newer opportunities elsewhere.

GPF should run independently by eminent personalities having impeccable record on Integrity, Ethics and Governance and there should not be any interference from any nation except for the fact that they have the right, as a contributing country, to measure the performance of their employment and education numbers.

It’s a global shame to have poverty persisting in the world, which is dominated by modern technological advancements. Recent global turmoil has made the globalization a failed concept and that was because of the skewed capitalist policies. Neither is it fact that, socialism can bring equilibrium.

We strongly believe making, Education, Skill Development and Employment, mandatory for all living citizens can only bring inclusive growth.

It is possible, if it is made a global responsibility, and we wish it is not a wishful thinking.    

T Margabandhu

M/s Marggo India 

Lifting the Small Boats from the Economy of Exclusion. Purge the Poverty and Push People towards Prosperity

In a recent address at Grandes Conferences Catholiques, Brussels, Christine Lagarde, Managing Director, IMF has discussed about what is called as “Small Boats” - the livelihoods and economic aspirations of the poor and the middle class.

It is globally a known fact that the inequality between the rich and poor in every Nation has been a problem of permanence which in fact, to a great extend, has pulled down the potential economic growth of every country on absolute terms.

While the global inequality has been addressed to some extend and the gulf between the rich and poor countries are falling down steadily over the centuries, the ability on the part of each country to reduce the gap between the richest and poorest has always been on deficit.

Emerging economies have responded well in the recent decades in terms of rising average incomes of their people and they have outperformed the developed world in on the rate of growth in income levels.  

The massive global flows of products, services, people, knowledge, and ideas have been good for global equality of income – and we need more of that. So we can further reduce the gap between countries.

Wealth Creation for poor is an irrelevant term as they only manage through to meet their ends, throughout their life cycle. Countries, with strong demographics and growing middleclass, like India, should have structural policies encouraging higher savings in financial assets that can help in harnessing potential economic growth and reducing economic inequality.  

The sub- par growth in India can be on account of excessive savings on physical assets which directly does not contribute to the GDP. Savings through banking system is equally substantial in India but it acts more as a measure of safety rather than creating wealth.

Long term Investments into capital market as a measure of wealth creation, is very low in India, as the conservative culture embedded on Indian family system prevents them to look beyond safety. Individual families rely upon gold and real estate as key assets to create and transfer wealth to their successive generations.

The biggest flaw with the State is their lack of ability to impress upon the population, the power and velocity of the financial assets in generating growth, employment and earnings which can lead to faster wealth creation and to reduce income inequality.

Interestingly, the rich and ultra rich who are supposed to be the ones investing in Capital markets, also have limited exposure to stock markets and mutual funds.

	LONG ROAD TO WEALTH CREATION
YEAR	GDP (Cr)	FIN SAVINGS (Cr)	Equity savings(Cr)	Fin Savings To GDP(%)	Equities To Fin savings(%)
2006-07	42.9L	7.6L	50,600	17.7	6.7
2007-08	49.9L	7.6L	74,000	15.2	9.8
2008-09	56.3L	7.2L	-5,100	12.8	-0.7
2009-10	64.8L	9.9L	44,800	15.3	4.5
2010-11	77.8L	10.7L	1,700	13.8	0.2
2011-12	90.1L	9.2L	-2,800	10.2	-0.3
2012-13	101.1L	10.2L	43,800	10.1	4.3
2013-14	113.6L	11.3L	27,400	10.4	2.4
2014-15	126.6L	13.4L	39,300	10.6	2.9
2015-16	140.5L	15.2L	52,200	10.9	3.4

While the equities as a % of financial savings are very low in India, which is a concern, the larger issue is the lack of broad base. Even a small part of their savings, from middle class families, routed through equities as long term Investments, can make a substantial difference to the economic growth as well as the family’s wealth creation.  

Private sector should also play a vital role in bring the awareness on the power of velocity which the financial assets can generate and enable the emerging middle class to make a part of their savings coming through capital market. This will make a massive transformation for the nation in terms of incremental growth and can really help the small boats to rise along with the yachts, in creating wealth over the long term.

Latest data from NSSO show that the share of total value of assets in equities in rural India is 0.07% and that of urban India is just 0.17%. The share of Bank Savings in the total value of assets in rural India is 1.65% and that in urban India is 4.35%. It is still dominantly skewed towards the physical assets.

While the Government and Private sector has the responsibility of investing into Innovations, Infrastructure, Education and Employment generation, the People of the country also have equal responsibility in terms of generating more savings into financial assets which can flow into the economic system.

India has the most favored demography, which will be the driving factor for growth and can generate more capital required for growth internally if People can make a decent shift in their savings from Physical assets to Financial Assets.

People should come forward to trade a bit on the risk, to generate wealth. Indian Equities have generated a CAGR of 12% in the last 3 decades and many Mutual Fund Assets have delivered as high as 17% CAGR in the last 20 years.

Over 500 million of Indian Population is in the earning cycle and this will move towards 650 million by 2030. If every Individual earning population of India starts saving 2-3% incrementally on financial assets and especially into capital markets, the impact on growth can be substantial.

As Madam, Christine Lagarde says, we need to lift the “small boats” to generate stronger and more durable growth.  If we lift the income share of the poor and middle class by1 percentage point, then GDP growth increases by as much as 0.38 percentage points in a country over five years.

Expecting an Inclusive growth is not enough… to achieve the same…Inclusive efforts too are required and People of the Country do should contribute, by saving more into productive assets.

T Margabandhu

Market Effect on Learning Business – Inviting Youth to become Owners of Business

What is all about buying Stocks....95% of the population has no access to equities on account of lack of affordability or access or Information. Again the larger part of the 5% who invest in stocks believes it as a platform to speculate and make/lose quick money. By and large the majority of the earning people do not get into the market, with defined purpose.  

What if building an investment portfolio of great stocks was easier than you think — and something so straightforward pretty much anyone could do it?

Before that, let’s make one thing simple and clear. Do not look at Stock Market for Speculative Earnings. This message is loud and clear for all first time investors, the ones who do not understand markets and also those who get scared about losing money, and for those who mindlessly enter and lose money on speculative trades.

Stock Market is a place to buy businesses. It is through this platform that we can understand businesses, by measuring things like nature of business, the market potential for the business, profitability, growth prospects and balance sheet strength. Thus we can go and buy high quality business. By buying those stocks we actually get to become owners of the business. 

This attitude is extremely critical for any investor who would like to or who fear to get into stock market. A strong grounding on this principle will enable investors to look at markets with calm.

Warren Buffet’s one of the Investment philosophies is to assume every investment to be lifelong asset. Mind has to be trained to look at every good stock invested as our own business and try and learn that business through gathering information and understanding that business thoroughly over period of time.

Small Cap business is an ideal platform for learning about business. Identifying high quality business and investing not only money but also time and energy on learning about the business will help in building wealth out of the business. Even if we make a mistake, being not a speculative investment, the loss can be minimized and course correction can be effective.  

If you had only invested in small-cap, high-quality stocks over time then you would have ended up eating two free lunches — one because they were small, and another because they were high quality. Your portfolio would be stuffed to the gills with profits over a longer period of time. 

If you had wanted to beat pretty much any stock market over time, at any point, all you had to do was buy the stocks of companies that were both small and “high quality” when measured by things like balance-sheet strength, profitability, stability and growth.

Today the demographic profile of India is youthful and this is a boon and the bane. If we do not create enough employment opportunities, the same demography which is a very big asset can become a liability.  We need more entrepreneurs to build India big and encouraging and promoting entrepreneurial mindset among the youth is critical for long term sustained growth model.

India was traditionally an entrepreneurial economy. But in the recent decades with the growth in service sector there has been a tendency to move towards employment which gives comfort and cosiness for the youth by and large. 

Stock market can be used as a tool for generating entrepreneurs. Encouraging youngsters to get into the habit of buying business, through stock market, as a part of their savings and enable them to learn that business can trigger the entrepreneurial mind set for the individuals. 

Small Investors with little money can also get into the market to buy high quality business, which will be a great opportunity for them to have access to learning about good business models. 

We strongly believe that educating investors to invest in good business models and to make them use equity market as a platform for acquiring quality business will be the only way to encourage youth in India to promote entrepreneurial zeal. 

Let’s invite youngsters for the mission entrepreneurship through stock market.