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Indians are now going abroad with a return ticket

Jun 25, 2011

In this issue:
» NSE penalised for abusing dominant market position
» Diesel price will send the inflation skyrocketing
» 51% of India workforce is self-employed
» Govt finalising US$ 11 bn infra fund
» ...and more!
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For answers to these questions, and more, click here to read on...


A couple of decades back it was trendy for many Indians to go to the lucrative developed world with a bag full of dreams. Students, entrepreneurs and employees who set aboard the ship to the foreign land seldom returned home. Why would they? The developed world had all the charms to mesmerise them: great opportunities, big money and high standards of living.

As a result, India suffered a "brain drain" as many of its brightest and highly talented folks left the country to work elsewhere. The problems back then were also that our own economy didn't have enough opportunities to harness the full potential of these natives.

But the picture has reversed drastically now. The centre of economic gravity has moved away from the Western world to the fast growing emerging markets such as India and China.

A recent research on entrepreneurship surveyed about 153 professionals who returned from the US to their native countries (India or China) to start a business. Majority of them asserted that there were bigger and better opportunities in their own countries than in the US.

This augurs well for India. Despite having a massive young workforce, we still suffer a serious dearth of highly skilled professionals, entrepreneurs and leaders who can drive the engine of economic growth going forward. So the returning emigrants will actually be valuable intellectual capital for our country.

But it would be too naive of us to raise the toast right away. There are several things that need to be fixed before we can gain the full advantage of such intellectual capital. Now, it is a widely known fact that start-up firms are very important for an economy's good health. For instance, 62.5% new jobs in the US are created by companies that are less than 5 years old.

But do we have a really conducive business environment for start-ups. Not really! Though our country abounds in opportunities, several factors such as a dearth of initial funding sources, lack of support infrastructure, regulatory hurdles, etc. are major roadblocks that entrepreneurs are constantly faced with. We need to build strong platforms to unleash the full potential of our returning emigrants.

Do you think India will live up to its promise for the returning emigrants? Share your comments with us or post your views on our Facebook page.

 Chart of the day
The government has done it again. Diesel prices have been hiked by Rs 3 per litre, kerosene prices have been raised by Rs 2 per litre and LPG (Liquefied Petroleum Gas) prices have been hiked by Rs 50 per cylinder. This price hike was largely anticipated. The state petroleum companies have been reeling with under-recoveries on oil for quite some time now. It was just a question of time as to when the prices would be raised to help ease the burden for these companies. The other alternative was to increase fuel subsidies which is not a very viable option given the impact subsidies have on the fiscal deficit. But this fuel price hike does not bode well for the country's citizens who are already facing the fire of higher inflation. Diesel forms nearly 4.7% of the total inflation basket. An increase in its price means that inflation is again set to spin out of control.

Such steep hikes in fuel prices are going to severely hurt both businesses and households. It is important to note that the hike would have been much higher had the government not lowered its taxes on fuels. The government has now abolished the 5% customs duty on crude oil. It has lowered the import duty on all petroleum products from 7.5% to 2.5%. Additionally, it has also cut excise on diesel from Rs 4.6 per litre to Rs 2 per litre.

Today's chart of the day shows that diesel prices in India are one of the highest in South Asia. While diesel costs a bit more in Pakistan, the same is substantially cheaper in neighbouring countries Bangladesh and Sri Lanka.

Data source: Hindustan Times

Remember the famous Microsoft antitrust case? It should be recalled that not very long back, the tech giant was accused of abusing monopoly power when it sought to bundle its flagship Internet Explorer web browser software with its Microsoft Windows operating system. It was alleged that this move prevented rival web browsers from competing freely in the market. Well, a similar battle seems to be brewing amongst the different stock exchanges in India. NSE, India's largest stock exchange and which, despite only setting up in the 1990s now dominates the market for equities, currencies and interest rate futures, has been slapped a fine of Rs 555 m for abusing its current dominant position.

MCX-SX, the rival of NSE and the firm which filed the case had alleged that the latter had attempted to kill competition in the currency derivatives market by, among other things, not opting to charge for its services. Competition Commission of India (CCI), which slapped the fine on NSE, found the accusations to be true and also directed the firm to refrain from activities that would unfairly protect its dominant position in the currency derivatives market. We believe that the action taken by CCI is indeed the right one. Trying to kill competition by cross subsidisation isn't really the right way to compete according to us.

Unemployment is a glaring problem around the world including India. Though the Indian government has already initiated schemes like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), it is not proving to be enough for the existing work force. This is once again proved in the latest survey done by National Sample Survey Office (NSSO). As per the key findings of the survey, 51% of the country's total workforce is self-employed. Only 15.5% are regular wagers or salaried employees. Rest 33.5% are casual labourers.

The survey also highlights one more important point which is the difference between the wage levels of male and female workforce. Female-male wage ratio is 0.82 in the urban area. This ratio is even worse in the rural area, just 0.63.

It seems the Indian government's plans of revamping the country's infrastructure are finally beginning to take shape. As proposed, the government is finalising setting up of US$ 11 bn infrastructure fund. The debt fund will be used for financing the infrastructure projects of the country. It may be set up either as a trust or company. In the former case, it will function as a mutual fund whereby units will be issued to investors. If set up as a company, it will be in the form of a non banking finance company which will be regulated by the Reserve Bank of India (RBI). With this fund, the government is expecting to source long term capital from both local and overseas investors especially insurance and pension funds.

The Indian Government plans to spend US$ 1 trillion to build roads, ports and airports by 2017. The debt fund is expected to provide long term low cost financing options for these projects. The same is expected to get launched within a few months.

It was a mixed week for the world markets. While the Asian markets closed the week in the green, the markets in Europe and the Americas closed the week in the red. Hopes of the Greece crisis being resolved after the country's government won the confidence vote and release of oil from US' strategic reserve helped change the investor sentiments in the Asian markets. However, the European markets continued to remain cautious which put pressure on the major bourses in the continent. In the US, concerns on a possible QE3 programme after the unsuccessful QE2 programme ensured that the US markets closed the 7th week out of the last 8 in the red.

Japan was the biggest gainer of the week up 3.5% while France was the biggest loser down 1%. In Asia, China closed the week up 3.1% while Hong Kong was up by 2.2%. Indian stock markets were up by 2.1% after a surge of 513 point on Friday. This was on the back of positive sentiments that inflation would come down as the government would not raise diesel and LPG prices. However, the government's decision to raise the same late Friday night proved the markets wrong. Singapore closed the week up 2%. In Europe, UK and Germany were down 0.3% and 0.6% respectively. In the Americas, Brazil was down by 0.1% while US closed the week down 0.6%.

Source: Yahoo, kitco, cnnfn

 Weekend investing mantra
"Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes." - George Soros

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22 Responses to "Indians are now going abroad with a return ticket"

shome suvra

Jun 25, 2011

These talents should be utilized to meet the growing needs of India's industrialization.Venture capitals, factoring of receivables,outsourcing from big companies which requires the entrepreneurs' skill based talents to lead to innovations and encourage cross-selling are some of the opportunities they need to grow. Partnerships with the private equity players is a good alternative.



Jun 25, 2011

I wouldn't agree entirely with the this report the way it is generalized. No doubt that there are lot of opportunities in its nascent state in India, but tremendous amount of challenges and reforms it requires in order to make them visible. I see still licensing raj is in existence and corruption is at its peak even though Anna is ready to die for cleaning it. Every office/table requires money to move forward the files or complete the work. Also the poor infrastructure is making this theme worst. You see the road condition in city like Mumbai is worst than Ahmedabad. Government officers are only want money money money..... Corruption is all over...


Aniruddha Deshmukh

Jun 25, 2011

The single biggest hurdle for entrepreneurs is excessive taxation by Govt. Imagine a business India - a new entrepreneur (having no social security cover) dealing with world's highest interest rate (at 13%) and world's highest real estate rates ( Over 1Cr per acre along all highways) and highest fuel prices( 70% tax on petrol) and 40% taxes ( ED & VAT) - before earning even one rupee - competing with CHINA ?


Ankit Kejriwal

Jun 25, 2011

this is such a gr8 service for which i'll be always thankful...its gives me every news i need in short...good work team



Jun 25, 2011

I am NRI thinking about having a startup in US instead of India. As I see lot of issues in bringing up a startup and grooming it successfully in India. Primary reason beyond the infrastructural and regulatory restriction is the mental attitude of the workforce. The workforce is not a disciplined one the the respect for the work they take up is very low. This is because there is no reason for an individual in India to take up a job and work on it with full productivity. Most of the time the workers perform a very poor job and expect more in remuneration. I see that it is lot more easier to hire and retain staff in US rather than in India in today's economic situation.



Narendra S.Padhye

Jun 25, 2011

Main curse for Indian business environment is Corruption in Govt.offices at all levels.Go to Registrars office for registering your land or building -without giving money under the table you cannot register even your own land&building.Go to get your company registered same is the experience.Go to Pollution control,Inspector of factories,Banks for loans,Fire dept,Police Dept.,Ministry of labour,finance & what not ? Unless you are ready to pay bribes,tips,willing donations call it anything but bribe before earning money in business ,YOU are not allowed to start .When & really GOD ONLY KNOWS when all these hurdles will be over ONLY then cream of our society will start returning.


Sreekala Warrier

Jun 25, 2011

It is not a question of will India live up to the aspirations of the returning emigrants, but what will the emigrants contribute to an emerging India. All said and done, these 'brightest and highly talented' folks left India when the country needed their services the most. Now the country is beginning to do economically well, no thanks to these bright brains. So we do not need to worry about what the country has to offer them. But yes, we do need to worry about the problems of start ups that any entreprenuer will face in India. We need to remove all the hinderances before the country can really take a leap and become the leading superpower.



Jun 25, 2011

Equity Master Team,

In the context of your article , I am prompted to Quote in all my humility fortified with abundant IGNORANCE to cite a real instance that took place some decades
ago in a Southern state of India :

An eager entrepreneur(a qualified electrical engineer) on seeing the incentives(offered and promised) for small scale industries in the Industrial Estate being set up by the Government of the State wanted to set-up a small scale unit. When he enquired about the availability of power for his unit he was told that once when he sets up the unit ,power will be made available. This led him to the eternal unsolved question of “ WHICH CAME FIRST ? THE EGG OR THE CHICK ?? “”
The situation or the general environment has not changed very much from the instance quoted above all over India !!

One needs to walk the talk or the solemn promises (made often in words/proclamations etc.) into concrete action for the envisaged results indeed !!


Rajni Mohan

Jun 25, 2011

It is good that professional from india and china are coming back to homeland. They will contribute their technical and professional skill acquired abroad and will do good business also.
Infrastructure projects, power sector , Engineering industries, banking and insurance will grow and thrive on this development.
Power will again shift to East.



Jun 25, 2011

see the film shivaji the boss by rajini kanth.
it is abt a nri coming to start a medical college for uplifting indians. the corruption level is real and dangerous.

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