Is Manmohan Singh a blessing or a curse?

In this issue:
» Pvt participation in railways: a solution for infra de-bottlenecking?
» NPAs are good for this business?
» Financial troubles make airlines unsafe for travel?
» Simple solution for oil cos
» ...and more!

00:00

The year 2011 is being touted as one of the worst for the Indian government. U-turn on major policies just because they threatened loss of votes. Policy paralysis. Spate of scandals. Stark evidences of corruption. Such issues have darkened the public image of the government. Even the business community hurled verbal stones blaming the government and most importantly the Prime Minister (PM) for the dismal state of affairs in the country.

The PM, Dr Manmohan Singh, has naturally come under the hammer as he is the face of the government. He has been held responsible for the government's inaction. But despite such a widespread negative opinion, there is one respected gentleman who thinks that we Indians are blessed to have Dr Singh. This gentleman is none other than Mr Deepak Parekh, of HDFC Ltd who in 2011, was vociferous on issues like the inefficiencies of the Indian government. He is the same man who had co-authored the Open letter to the PM citing the need for better governance to improve the business sentiment in the country. Now in a recent media interview, Mr Parekh has stated that Dr Singh is the best Prime Minister that we have had. The reason for this is that Dr Singh is one of the cleanest politicians with hardly any scandal or misappropriation to his name. Without argument, Mr Parekh's reason is true. However, we think his conclusion is wrong.

True, Dr Singh is as clean a politician as it comes. However, his inaction and silence on the poor governance by his team question his ability to lead the country. We need a PM who is willing to bring about the much needed reforms. Considering that Dr Singh is the same person who had introduced reforms way back in 1991, he does appear to be the ideal candidate for this job. But by bowing to the demands of the coalition as well as the opposition, he seems to be doing everything but his job. His job profile appears to be just helping his peers in garnering more votes. Rather than helping the country, the job for which he was appointed in the first place.

Do you agree with Mr Parekh that the Prime Minister is a blessing to the country? Share your comments with us or post your views on our Facebook page / Google+ page. ---------------------------------------- Did you miss the Webinar? ----------------------------------------

Equitymaster's Webinar on the Future Prospects for the Indian Economy with Mr Ajit Dayal was broadcasted on 30th of December, 2011.

The webinar answered questions that could be troubling any Indian Investor today. Where is the Indian Economy headed in 2012? Is Gold still a good investment? Could the Stock Market touch the 21000 figure in 2012?

If you missed watching the webinar, here is your chance to access the same.

Click Here to watch: Indian Economy - From Darling to Damned (Rebroadcast)

And let's understand what lies ahead for India and how could this impact your investments.

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01:30		Chart of the day

Increasing stock market volatility has turned investors cautious in India. The direct impact of this is visible in the falling cash market volumes. Today's chart of the day shows that the cash market volumes have started coming down. In 2011, cash volumes stood at Rs 34.5 trillion, which is nearly 32% down from the levels of 2010. In fact, these are the lowest volumes since 2006. Even in 2008, the volumes were high at Rs 45 trillion. Such dwindling volumes and the resultant investor wariness have led to major losses for the brokerage business. So much so that some of the smaller brokerage houses have had to shut shop in recent times.

Data source: Economic Times

02:10

India's ambitious national highway development programme may not be termed as a runaway success. But very few can deny the fact that India's road infrastructure has certainly come a long way in the past few years. And with this fact firmly in front of them, we used to wonder what is stopping the Indian railways from taking a leaf out of the book of highways and thus do their bit to attract large scale private participation in the sector. It seems Indian Railways could finally start to open its doors. As per reports, the railway ministry has come up with a new draft policy that seeks to attract increased private participation including foreign direct investment for expanding its network. The policy covers areas like creating railway connectivity on private land, forming SPVs for new lines and up gradation of existing ones and awarding railway projects on BOT basis amongst other things. The move is indeed a good one as the existing cash flow of Indian railways will fall woefully short in providing the necessary infrastructure required to boost India's economic growth. As usual though, the most important thing to watch out will be whether the new guidelines will in fact see the light of the day. Or will they be put forever in the cold storage.

03:02

As the saying goes 'One man's loss is another man's gain'. The banking sector's loss has turned out to be a gain for the legal fraternity ever since the financial crisis struck the quality of loans across the sector. With little hopes of earning positive margins of the loans, banks hope to at least recover the principle amount from some restructure loans. In some cases this too is a forlorn task without the intervention of legal help. Hence legal firms have been in demand not just for aiding recovery of distressed loans but also buyouts of firms that are under financial stress. Companies hoping to turn around bankrupt firms have made a beeline for top corporate law firms over the past few years. So much so that many firms have set up dedicated teams to pursue such clients. While such a trend may not be very long lasting, most corporate including banks will want to ring fence their exposure to risky sectors with more legal intervention we believe.

03:45

The Indian airlines industry has been in serious trouble in recent times what with Air India and Kingfisher Airlines struggling to keep head above water. High prices of fuel, high operating costs, inefficient management and the like have taken its toll on the finances of these 2 companies with both of them looking for a bailout. But the more worrying sign is the issue of safety. Given that the industry is highly strapped for cash, not enough investments are being made to maintain safety standards. In fact, a financial audit carried out by Directorate General of Civil Aviation (DGCA) found that widespread sickness in the aviation industry was seriously impacting safety of flight operations and recommended action under Aircraft Rules and the Civil Aviation Requirements. While the Aviation Minister has strongly expressed that the government will not tolerate any violation of safety norms, there is no clarity on how the government intends to ensure that aviation disasters do not occur in the future. With near accidents in the air increasingly making headlines, the Aviation Minister will have to take some definite action if his word is to be taken seriously.

04:20

Fuel subsidies have long been blamed for ballooning Indian fiscal deficit .While the Government has been trying to play vote bank politics and crying foul over rising under recoveries and subsidies, nothing has been done on the diesel deregulation front. The reasons are not hard to find. Thanks to high taxes (exceeding outflows from subsidies), the Government has been a net revenue earner from the state run oil marketing companies so far. However, with the cut in duties in June this year, the tables have turned. If the Government chooses to continue with the current fuel pricing system, it will face losses to the extent of Rs 40 bn.

Certain setups need a rough jolt for things to be in order. The fuel pricing in India is one such set up and the net loss to the government this year could be that push to make a final call for deregulation of diesel and rationalize fuel price taxes. Is the Government ready to act?

04:45

In the meanwhile, the Indian stock markets have continued to languish below the dotted line. At the time of writing, the BSE Sensex was down by 65 points (0.4%). Stocks in the banking and FMCG sectors were witnessing maximum losses. Barring China, nearly all the other stock markets in Asia closed the day on a negative note with Singapore and Korea leading the losses. Europe too has opened the day in the red.

04:55

Today's Investing Mantra

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett