ILO report on Employment trends 2009.

Sunday, April 26, 2009

I found International Labour Org report on Employment trends 2009. It provide good insight in the world employment market for 2009. clicking the link would take you to ILO site (, so as to directly read the report

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Capitalism Vs Socialism - Part1

Thursday, April 23, 2009

With so much talk about recession, job loss these days, I was wondering about Capitalism Vs Socialism and where is the world heading for in the future?.

Whats Socialism / Capitalism mean ?

More than a decade now, capitalism has been the world’s dominant economic system. Which means production and distribution are owned by individuals, private ownership and free enterprise and competition between enterprises are believed to lead to more efficiency, lower prices, better products and rising prosperity. On the other hand, Socialism advocates the ownership and control of the means of production and industry by the community as a whole: the community is believed to be both more just and more efficient through central planning.

Indian move towards capitalism....
India's freedom struggle was more towards non violence and more democratic in nature. Hence, after independence India was oriented towards socialism, many public sector were created as democracy was related to 'for people by the people'. India's previous generation leaders thought more towards socialism, which is definetly a boon if it work effeciently. However, due to various factors many public sector turned into loss making ones.

In late 80's, Indian economy was in bad shape and hence no new public sector undertaking were promoted and around the same time USSR started crumbling, at the same time western countries was more towards capitalism and were on lookout to sell its products & services and India had a huge market potential; India was also looking at IMF for its financial needs.

Indian market liberalization started in late 1980's, which paved the way for capitalism which was practised in west, around same time collapse of USSR started and it collapsed completely in 1991 after which not much was talked about socialism and it was thought to be a failed model.

Is Western economy moving towards socialism?....
Capitalism gained ground and it was working effectively until the financial 'tsunami ' took over recently, and I believe this recession was created more out of greed. In most cases, capitalism lead to greediness, they innovated techniques and more importantly they were able to sell these techniques and thereby started creating a bubble in commodities and real estate markets.
When the bubble burst most of the industry started getting affected slowly and eventually lead to liquidity crunch. Most of the western companies revenue went southwards and they were on look out for finance, but unfortunately US banks and financial sectors were equally hit badly due to toxic asset which were mortgaged to it at a higher value during boom times.

Eventually, not only the US industries but also the US banks are now looking at the US Govt to bail them out from the mess. In the last few months US Tax payer money is being used bail out banks. What is interesting is after failure of Enron, Sarbanes Oxley compliance brought into play and in spite of this companies had failed. US is now in process of putting more control in place since Tax payer money is being used for bail out.

So the question is US moving towards Socialism, which was once thought to be the captain of capitalism? and would eventually world economy move towards socialism?

Will continue on this later and welcome reader's thoughts and feedback....

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'IT' Happenings...

Tuesday, April 14, 2009

Early part of this weeks, there are important happening in IT sector, which had been reported in News channels.

i) Tech Mahindra showing faith in Satyam and acquiring the same.

ii) Infosys losing faith on about 2000+ employees and were given 'pink' Slip, citing performance factor

I believe both are significant development in the IT sector.

Now, coming to Tech Mahindra its in interesting proposition,

Financial Prespective: Its expected to invest are approx Rs 2900 crores in Satyam, except Rs 700 crores the rest 3/4th of money for this investment is going to raised as debt.

So the next question would be if its going to raise these fund as debt then its have to payback interest and principal or atleast the interest. Ideally, in business or accounting sense there need have a ROI (return of investment) which can service the interest part. More importantly

* Satyam should be a profit making company (We were aware that company's account books are in the process of being re-stated).

* Apart from being a profit making company, it has to declare dividend, These dividend should have to be more than 10% (considering bank interest is going to be above 10%). But, then the 10% dividend is only on face value of the share and hence might not be a huge amount to service the debt.

The other alternative options could be that, sell the stocks acquired by Mahindra's once it reached higher maket value , I believe Mahindra's have quoted Rs 58 per share OR look at some other internal source of money to service the Debt. Nevertheless, its going to be an interesting proposition of using debt to finance the equity.

Product / IT services prespective: As far as I am aware of, Satyam does not have any software product to its credit, its more of IT service provider company.

Well, I am not sure whether it really makes sense to acquire a IT service provinding company. Offcourse, when you acquire IT service providing company, you do get the clients as well. But then these days, the MNC client are dependent on product rather then service.

What this means is if company 'A' (customer) uses an ERP for example SAP, then its dependent on this product software. Going for a different product software year-on-year basis does not make sense. However if company 'A' has a very good controlled implementation environment, meaning all customization are tracked and have the documentation for these customization then support services can be shifted between the vendors based on the support pricing they offer year on year basis. Hence, these days all fortune companies chooses their vendor on periodic basis based on pricing and other value add they provide. Same is the case, with new implementation as well.

Finally, with current economic recession, if revenue are going to be hit, Satyam should not end up being over capitalized.

Any ways, its not my money and I am sure Mahindra would have done it own analysis and should also be having a strategy in place to become a top player in the IT services sector.

All the best Mahindra & Satyam, was wondering what would be the new name of this business entity ?!!?.

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Mythology & Business

Sunday, April 5, 2009

I read an article in outlook business, found it quite interesting and hence thought of sharing with readers of the blog

Click to read related article in Outlook Business

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G20 leaders agree to allocate $5 Trillion....

Saturday, April 4, 2009

Well, as I mentioned earlier in one of my blog that I am not an economist. In yestarday news paper I saw that the leaders who met in London on Thursday agreed to allocate $5 trillion by the end of 2010 to resolve the global economic crisis, with one-fifth of the funds going to the International Monetary Fund and other financial institutions.

Will it bring back "boom time"?

I am still not sure, how just pumping money would bring prosperity to the world. No doubt when you pump in money into the financial system, as more money is available at disposal, credit availability become easier, the bank would start lending it to business, there is going to be employment, when there is employment the purchasing power increases. But will this, not once again rise inflation? Not only inflation happen, this would start creating a 'bubble' to be burst again at some point of time.

So as long as the 'new' printed money is available its 'boom' times and once it is spread out to various corners of the world or probably stacked at 'Swiss' bank over the period of time, the recession set it...

Ideally, why not G20 or G7 ask the Swiss bank to disclose the names of the account holders along with the amount held in these accounts, I am sure this itself would be a substantial undisclosed amount which is parked safely.

Any different thoughts?

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