IITs & IIMs Everywhere….. Is this a Right Move?

News: HRD minister Arjun Singh announced that 8 new IITs and 7 new IIMs will be established in India very soon.

Arjun Singh’s Logic: If 7 IITs and 7 IIMs can have such a big impact, then why not we have 7 more for each?

My View: Why not we have 70 or 700 more for each? Soon, there will be enough IITs and IIMs that we will not need any other engineering colleges or MBA programs. Every student will go to an IIT and then to an IIM. After completing MBA from IIM all students will start with a salary package of 100 lakh Rs per annum. Will not that be better Mr. Arjun Singh?

Once upon a time I saw on one news channel a state chief minister telling the public that his state will have an IT park in every street of every town. It was an imagery statement by a politician for the sake of pleasing his vote bank. Announcement about new IITs and IIMs by human resources minister is also same kind of statement. I was perhaps humored by the government’s decision to extend (Please read ‘dilute’) IIT and IIM brand as never done before by any government in Indian history.

The keyword here is brand dilution. Perhaps it is the dilution of brand through its overuse.

Brand IIT was a dream that started in 1951 with IIT Kharagpur will soon be killed by the stupid politicians who by mistake consider themselves the saviour of India. The man who has a dowry case filed against him by his daughter-in-law, the man who was once accused of running a fake lottery, has decided the fate of Indian technical education. With this increasing number of IITs and IIMs brand IIT & IIM will be diluted to a point where we will end up average mind studying in IITs and IIMs.

The icing on the cake is that new IITs and IIMs will come up in backward areas and end up taking many more years to become tall institutions than necessary. True, we set up IITs & IIMs in locations like Kharagpur and Khojikhode. But that was a different era. Today it will be difficult to attract good talent and faculty in these backward areas.

If practical aspects are ignored, the new IITs and IIMs will definitely suffer. And that is not good news for anyone.

As far as I think primary education is the most fundamental building block for any education system and if this is not strong you can imagine what will happen to the building that we are going to create above that.

Should not government work towards raising the standards of government funded schools first?

Should not government stop establishing new IITs and IIMs and give enough funds to these schools first?

Should not these schools also have the same education system as DPS and Bombay Scottish?

If we will start having students from government funded schools getting selected in IITs and IIMs then only I think it will be a right time to establish new IITs and IIMs. Then only we can insure that we are having a fair education system and justice for all the classes of Indian society.

Impact of US Recession on Indian Economy

I have seen that forecasts are being made about the recession in the US and therefore slowdown in India. Some reports even said that India is in the middle of a slowdown now. I wonder why such an exaggerated view?

There is a definitely a slowdown in the US economy. I am not sure this has turned into a recession yet.

Emerging economies (BRIC economies, Ukraine, Turkey, Argentina, and Chile etc.) are now contributing for a very large proportion of global growth. India, China and Russia alone contributed over 30% of the growth in the global economy in 2007. This is totally different from the late 1990s when the US economy had a central role in global growth. In fact the weight of the US economy in the entire global economy has been declining since 2001. At the same time the weight of the BRIC economies (Brazil, Russia, China and India) has been rising steadily.

In 1999 the US economy represented 30.91% of world GDP, and in 2007 this percentage is down to 22.4%. In 2000 the US economy accounted for an impressive 40.71% of global growth, and in 2007 this share is down to 6.43%. So there are obvious reasons for thinking that this time round the impact of any US recession will not be as acutely felt in some parts of the world.

The fact that the rupee has risen considerably is in itself an expression of the confidence levels imposed in India by foreign investors.

Interdependencies between the US economy and emerging economies like India and China has reduced considerably over the last decade. Thus, the effect may not be as drastic as would have been the case in late 1990s.

Some specific sectors like IT Enabled Services sector, Tourism sector etc may be a hit. Also due to appreciation in rupee exporters are pushing government to intervene and rate cut. But what is being forgotten is the fact that stronger rupee will cut the import bill.

If things don’t get worse than already predicted in the US housing markets, the world economy will only show a modest slow down in 2008. It follows then that India should still show substantial growth and there should still be bullish trends (a little moderated and realistic) in our stock markets.

In summary, at the macro-level, a recession in the US may bring down GDP growth, but not by much. At the micro-level, specific sectors could be affected.

For US firms, who have long looked at China as a better investment destination, this may be a good time to look at India as well. After all, 350 million people with purchasing power cannot be ignored. This is not a sales pitch for India, but only a gentle suggestion to US corporations.

Why Gold?

GOLD, I was never very much interested in parking my money in this instrument of investment. But after the current crash of stock market I was looking for some other investment instrument which can at least beat the inflation rate in India. No doubt equity is the best instrument of investment provided you are a long term investor but nowadays Gold is also an equally good investment option and one should definitely have this in his portfolio. Especially considering the fact that future prospect of Gold seems to be very bright. Let’s first see the past two year’s performance of Gold and Sensex:

Date	Sensex	Gold ($/Ounce)
As on 31/03/2006	11279	581.50
As on 30/03/2007	13072.10	663.30
% gain in FY 2006-2007	15.89%	14.06%
As on 30/03/2007	13072.10	663.30
As on 31/03/2008	15644.40	918.00
% gain in FY 2007-2008	19.70%	38.39%

Table above clearly is in the favor of Gold. Apart from this Equity vs. Gold statistics why Gold finds a place in the portfolios are:

1. Statistics shows that Gold is a good hedge against inflation

2. Can be easily converted into hard currency

3. Has ornamental value (more so for Indians)

The price set for the international Gold market is currently dominated by the US Gold Market and the London Gold Market. Domestic Gold is priced according to the international price, so there are significant ties between the international Gold price and domestic Gold price. Statistics show that spot price differences between the international Gold market and the domestic one are usually within one percent of the other.

Factors that influence Gold price in international market:

International Gold price is heavily influenced by global affairs concerning on geopolitical issue, US dollars and oil prices etc.

International political issue:

When the political situation is unstable in key countries, will often affect the Gold price. After 9/11 international Gold price surged by 6%. Recently, the increase in the international Gold price has been attributed to the assassination of Pakistan's former Prime Minister, Benazir Bhutto.

Trend of US dollar:

The trend of US dollar has a very strong impact on the Gold price. When the dollar is weak, people will sell dollars and buy Gold to avoid taking a hit with the dollar's decline, causing a rise in the price of Gold. Conversely, if the dollar is strong, the Gold price will go down.

Trend of Crude oil:

Crude oil is economic resource, so a rise of oil price often causes inflation, when investors subsequently buy Gold to maintain wealth, causing a rise in Gold prices. Gold is seen as a good hedge against inflation.

Limited supply:

In most industries, rising demand kicks off an increase in supply that brings prices down. But Gold is often less than responsive as new supply is limited. There have been no new large discoveries of Gold. Even if a new mine is discovered, it will be about 10 years before the first ounce of Gold sees light of day.

In addition to these factors, performance of major stock markets in the world, the price levels of major commodities and global finance distress also causes Gold prices to fluctuate.

Why Gold????????????????

If we consider these influencing factors one by one………

US dollar is touching its low everyday…… causing Gold price to go up.

Crude prices are touching new high everyday…… again causing Gold prices to go up.

Current subprime crisis also appears to have sent investors into Gold.

Till recently, the dollar was used as a store of money globally due to the currency's stability and the low downside risk of a decrease in its value as it was the currency of the economic superpower of the world. But current downside in the dollar has moved people towards Gold.

The total value of all the paper money and bonds in the world is about $100 trillion, and all the Gold ever mined is just under about 5 billion ounces. So, world money, divided by world Gold, gives a figure of $20,000 per ounce. At $1000 per ounce, there is about $5 trillion dollars (5 billion ounces * $1000/ounce) worth of Gold in the world, but there is $500 trillion in derivatives, $100 trillion in bonds and paper money. Therefore, bonds and paper money must go down, and Gold must go up.

Crude Realities

Crude oil is the basic need for each country irrespective of whether it is developed economy or under developed economy.

But in developing economies like India and China crude oil demand is expected to grow around 5% in the year 2008. Currently crude oil is trading around at 118$ per barrel in international market and expected to reach at 130$ per barrel very soon, which will push inflation to record high everywhere. Globally, it could be a factor pushing the world economy into a recession. Even though some argue that oil will not swallow a big share of the GDP unless the price reaches $150 a barrel, high prices are here to stay for a fairly long time.

Instead of arguing like this, should not OPEC nation start finding new sources of crude oil. This will be in the interest of everybody. Otherwise developing economy like India and China do not have any other option but to look for the alternatives of crude oil. The government should plan to move towards better energy conservation and develop alternative sources of energy. The main industry that should come forward is the automotive industry. They should start their research and development for the hybrid vehicles.

The other thing that I can think of is that Indian government should start passing the burden of rising crude oil directly to the consumer. Instead of giving the subsidy in petrol, diesel, kerosene & LPG if government decides to pass the burden directly to consumer then only consumers will use these things effectively. When consumers start paying directly, there is every chance that demand will become more realistic. By this demand for crude oil will definitely come down, which can further put a break on the rising prices of crude oil.

Global recession will be in no one’s interest. OPEC should act in its own interest by adding capacities, because if the world turns rapidly to other energy sources, the party may well be over for the oil producers.

Reservation, Education and Economy of India

A part of India is in constant agitation because recently our HRD ministry and honorable SC judges have given their decision in favor of implementing 27% quota for other backward classes in higher educational institutes.

I believe it is the education system in any country which the foundation of its economy. Developed economy and underdeveloped economy can be distinguished based upon its education system. Every developed economy in the world is having very robust, efficient and effective educational system.

The Indian education system is at near death. It is not, and in fact has never been, very good. It is one of the most flawed and corrupted system in this county.

Why does India have shortage of qualified college graduates?

• · Getting admission into a good school or college has become an extremely difficult task. The IITs, IIMs and AIIMs can only admit fewer than 2 percent of applicants. (In IITs annually around 300,000 compete to get a shot at 5,000 seats.)
• · By the 12th standard, the school dropout rate reaches an astounding 94 percent. Of those who finally graduate out of college, only around 15 percent (less than one percent of those who enter grade one) are employable, leading to a serious shortage of qualified college graduates.
• · Tens of millions of students do not get a proper education for a variety of reasons. Who knows how many Ramanujans, Venkata Ramans and Vikram Sarabhais have lived and died because they never had the opportunity of getting an education?

Over above what disturbs me most is the negative trend in our system. The above mentioned problems can be solved by creating good quality educational institutes in every part of the country. Instead of creating good quality educational institutes our corrupt politicians are emphasizing for the reservation in the institutes like IITs and IIMs just for pleasing their vote bank.

Education system in India is in the dire need of reform.

One of the reforms that I think can be in this system is to get the government out of this. Lets declare all the educational institutes (specially institutes like IITs, IIMs, AIIMs) autonomous. Let’s appoint Indian entrepreneurs and businessmen in the board of directors of these institutes and let them take the decision about the number of seats and fee of these institutes.

The recent move by the government to further increase quotas in these elite institutions with a view to social justice is ridiculous.

Education is the basic right of every citizen of any country. Everybody needs to be provided equal access and equal opportunity to quality education, irrespective of caste, creed, and economic status, right from the primary to the higher secondary school level.

But…………

What about the underprivileged sections of society (So called OBS, SC, ST) of this county?

• · Provide scholarships and easy bank loan.
• · Provide free books.
• · Provide free lodging and boarding in school hostels.

The education system in India is poor by design and inadequate enough to meet the needs of its poor economy. It must be changed if the country has to develop.

But…………

Will those corrupt politicians who control the present system for their own personal gains are willing to let go for the greater good? I hope for the sake of the beloved country that it comes to pass. Else we are all having a miserable future.