Can India 'whistle blow' its way into the future?

Aug 5, 2010

In this issue:
» Where is housing most unaffordable in India?
» Where do Indians invest most of their savings?
» The Chinese are buying their third homes!
» Rich Americans give US$ 60 bn to Buffett
» ...and more!!

-------------- Become our Fan on Facebook and get a Thank-You gift --------------
On 10th August, at 10 am, we will launch our brand new investment guide, What the Charts Foretell, on how to understand the stock market better.
And we will launch this guide only on ...Yes, you guessed it right - Facebook! So become our fan and as a thank you gift, get this guide FREE. Quick! Just Go to Facebook. Click on the "Like" button and Become a Fan of Equitymaster now!

India does need more doctors, engineers, accountants, managers and teachers. But what it needs the most are whistle blowers. People who can save companies and the country from economic loss and embarrassment. The current state of the organizing committee of Commonwealth Games is pitiable to say the least. A disgrace to an economy of over a billion people making a claim to grow at the second fastest rate globally. And the government's solution is - 'whistle blowers'! It is now looking to pass a legislation safeguarding those who make an attempt to raise a voice against corruption. Given the kind of embarrassment that the Commonwealth Games has brought to India, it's probably too late. But as they say, better late than never!

Corruption has for long been the biggest drain on India's economic potential. And it is high time that a solution is sought to this problem. By the way, in an earlier issue of The Honest Truth, Ajit Dayal had suggested a different solution to this problem. That the post of 'Minister of Corruption' be created! He reasoned "The value of all products, goods, and services sold in India every year is about Rs. 49,50,000 crores (about USD 1.1 trillion). Wouldn't it be helpful if even 0.01% of India's annual GDP was spent on a Ministry of Corruption with its own investigations staff, its own courts and judges, its own jails?" Not a bad idea we think. But more importantly, what is needed to stop corruption is the spirit of pride in being an Indian.

What is your take on the corruption scandal that has hit the Commonwealth Games and the proposed solution of encouraging whistle-blowers? Tell us or make a post on our Facebook page.

 Chart of the day

Data source: RBI

Another area where corruption and greed have been deep rooted is construction of residential houses in Indian metros. And this has resulted in houses becoming unaffordable to a middle class household. As today's chart shows, house prices have risen by as much as 36% in metros like Delhi and Mumbai in the past 12 months. Thanks to artificial scarcity of space and faulty land policies. Mr. Deepak Parekh, Chairman of HDFC and a veteran on housing policies believes that multiplicity of approvals creates scarcity of supply, keeping prices elevated. According to him, land transactions have been made complicated to ensure that supply remains constrained and prices remain high.

Did you know that urban households in India earn 85% more than rural households? Or have you heard that an average Indian household spends 51% of its routine expenditure on food? Better still, are you aware that 63% of the households in India save for social ceremonies? Well, you need to go through the NCAER survey on Indian households if your answer to any or all of these questions is in the negative. The economic body has compiled many such interesting statistics in its survey titled How India, Earns, Spends and Saves.

Of particular interest to us was understanding where exactly does an average Indian household save its hard earned money? While it was heartening to know that 81% of Indian households save in some form or the other, the fact that 51% of those keep their savings in bank deposits did not exactly get our juices flowing. And it is this group that perhaps all the asset management companies and companies engaged in financial services will have to target if the Indian markets were to reduce their dependence on FIIs.

If you thought rising home prices was a phenomenon that was only taking place in Indian metros, think again! This problem has become acute in China as well. It may be recalled that prices of properties in China have reached unprecedented levels since the past one year. Indiscriminate bank lending was one of the main culprits of the same. So much so that people in Chinese cities such as Beijing, Shanghai, Shenzhen and Hangzhou are looking to purchase their third homes!

To curb this, the China Banking Regulatory Commission (CBRC) has instructed banks to stop extending mortgages to people buying their third homes. Especially in the four cities mentioned above. This puts to rest the speculation that China may ease curbs once again. Speculations that were doing the rounds because the economy had started slowing a tad. However, only time will tell whether the step will prevent the Chinese economy from having a hard landing.

The debate on inflation has been raging in the parliament these days. And why not? Inflation has become the bane of every Indian household. And in his defence, Pranab Mukherjee has said that a significant interest rate increase to tame inflation may not be such a good idea afterall. Infact, he went as far as to say that any such move could easily end up becoming a huge deterrent to investment, growth and job creation in the country. And so, the classic central bank dilemma of growth versus inflation continues. However, it must surely be added that one would be able to attach much more credibility to the RBI's policy moves had it not had the responsibility to double up as the government's debt manager.

The Tata Group will get its next Chairman by the end of 2012. This is if all goes according to the succession plan outlined by Mr. Ratan Tata, the current head. With a view to smoothly pass on the baton, Mr. Tata will be setting up a 5-member team to identify his successor.

We had recently read Mr. Tata tell the Wall Street Journal, "It would certainly be easier if that candidate were an Indian national. But now that 65% of our revenues come from overseas, it could also be an expatriate sitting in that position with justification now." In a country where family ties run deep and the successor is generally the promoter's son or nephew etc., Mr. Tata's plan comes like a breath of fresh air.

Anyways, Mr. Tata's shoes will be difficult to fill. This is considering that he has overseen the growth of the group's businesses with such a keen eye all these 19 years.

He did it in 1950s and now he is at it again. Back then he got people to give him money to invest in the markets and in turn helped them all earn millions. Now he is again asking people to part with their funds. But the difference is that this time it is for charity. We are talking about investment legend Warren Buffett. Buffett has managed to convince the richest Americans to pledge US$ 60 bn towards charitable and philanthropic causes. Buffett, famous for practicing what he preaches, has already pledged a large part of his assets to charity. He was joined by billionaire Bill Gates. Together they are now encouraging the wealthiest in America (as listed by Forbes) to join them in publicly pledging their wealth. The public statement is a way to encourage others to follow suit.

After a volatile session, the Indian indices moved closer to the dotted line as profit booking intensified in index heavyweights. The benchmark indices shed gains backed by profit booking in energy and banking stocks. Asia markets are trading a mixed bag with Japan and Indonesia leading the pack of gainers. The BSE-Sensex was trading nearly 37 points (0.2%) higher at the time of writing. The European markets have opened on a cautious note.

 Today's investing mantra
"The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future. If the margin is a large one, then it is enough to assume that future earnings will not fall far below those of the past." - Benjamin Graham

Today's Premium Edition.

Recent Articles

All Good Things Come to an End... April 8, 2020
Why your favourite e-letter won't reach you every week day.
A Safe Stock to Lockdown Now April 2, 2020
The market crashc has made strong, established brands attractive. Here's a stock to make the most of this opportunity...
One Stock that is All Charged Up for the Post Coronavirus Rebound April 1, 2020
A stock with strong moat is currently trading near 5-year lows.
Sorry Warren Buffett, I'm Following This Man Instead of You in 2020 March 30, 2020
This man warned of an impending market correction while everyone else was celebrating the renewed optimism in early 2020...

Equitymaster requests your view! Post a comment on "Can India 'whistle blow' its way into the future?". Click here!

56 Responses to "Can India 'whistle blow' its way into the future?"

Ashok Khanna

Aug 6, 2010

I don't think much can be done to remove corruption unless the people can throw out Govt.s overnight for coprruption. We have become a ' banana republic' and the ruling party gets the CBI to withdraw/ drop cases against Lalu Yadav, Mayawati & others when it needs their votes or suport in Parliament or for the next election somewhere, thereby according sanction for their misdeeds. This amounts to the Govt. in place being in collusion with the corrupt. So how do we get rid of corruption. Maybe we ought to ammend the constitution to enable the people to approach the SC to throw the Govt. of the day out on the mat.
But then is the judiciary above corruption, one may ask.

Secondly the corruption by the people in power caanot be sustained unless the Govt. machinery working under them coopertes. There has hardly been a case when any evidence against a politician has been accumalated to prosicute him, hence the beaucracy under him must be targeted with very harsh punishment for thier cooperation to the crime or silence. That will put a stop to this in some measure.


vikas loya

Aug 6, 2010

I have been following up with your newsletter especially regarding writeups on Inflation control steps taken by govt like rate changes, but still the inflation is not lowering. I want to bring to everybody's notice one serious area is high artifical or cartelised rates of commodities and other products as in property market there are cartels who have kept the rates high same is the case with every house hold items and this is where the govt should focus on and if needed be or should i say have to use an Iron Rod to clam such cartels, else i don't see inflation to come drastically down, this can only happen by strong will of the govt because cartels cannot exist for long without support from politicians and ministers.



Aug 6, 2010

If Vigilance Dept. can be corrupt, so can whistle-blowers. They will take bribes from people they want to expose. Dishonesty has gone so deep and deterrents are so paltry. The crime is so deep, it needs absolutely ruthless punishments to tackle.


dinesh talreja

Aug 5, 2010

Am surprised Govt hasn't moved in swiftly. Was really appreciated when in Satyam fiasco Govt had moved in swiftly. Though here Govt is directly to be involved, no response yet!


Tikam Patni

Aug 5, 2010

When Government run machinery be in sates or at the center, cannot make even an ordinary footpath efficiently, with perfection corruption free, it was foolish to take on CWG.

Let us face it, India is not ready yet.

Whistle blowers? They will be blackmailers with their own style of corruption thru exploitation. Till massive Police and Judicial reforms are in place, and till all rules and regulations are not only implementable but are made followable by ordinary citizens without any necessity of going thru touts and middlemen, such measures will only make our lives more miserable.

Citizens should be empoweres and made strong not Government.



Aug 5, 2010

India is a country of great resources and man power. The way an honest Indian is implicated by the dishonest and greedy 'Men in Power', it is almost impossible for an ordinary man to become a 'whistle blower' and save his skin. All this needs to be changed, for the country to become a Super Power in future.



Aug 5, 2010

Dear sir,

I am a Malaysian of Indian origin but I have a keen interest in India the land of my forefathers.

First the new Indian rupee symbol is going to bring in a totally new currency which leaves no choice for all those hoarding black money but to change their currency or burn them to glory. Bravo to those who advocated the change. Next corruption and black money hoarders should be given capital punishment and all their wealth confiscated. Last but not least democracy should not be total. Politicians should not be allowed to be dictators in their own constituency for the sake of votes. If they have committed crime come down hard on them. Guns should be outlawed, gun owners without license should be hung like in Malaysia. Partial military rule should be allowed. Many more but less time to write.



Aug 5, 2010

Hi, reg "Corruption and Whistle Blowers" -- I think it's a good idea to protect the whistle blowers so long as they are not disgruntled elements who are unhappy as they could not get thier share of the spoils. Better would be to create an environment which totally discourages Corruption-- something of the "Munnabhai" style where the corruptor and his family are socially boycotted/shamed,financial income/assets frozen when preliminary enquiry reveals corruption. In fact,I feel that to encourage merit we need to launch an all-out-attack on Corruption,Collusion and Nepotism --if we resolve these issues even partially, there is no stopping our ascent on the world stage. regards



Aug 5, 2010

We can talk for hours or days even for months on "what should or shoudn't be done to curb the corruption." Even i will do my bit in suggesting something that can really work, at least what i think will work. I will say install cameras(not visible to public) in all the government offices , all departments and setup a monitoring department ,where there will be monitors showing the video of happenings in all the places where cameras are installed.and there will be monitoring officers who will be watching and indentifying the suspicious activities like giving bribe etc. It will create employment for people willing to work in those monitoring offices. It can't fully stop the corruption but at least it can significantly reduce the level of corruption at places where interaction to general public happens like in passport offices, RTO, etc.


Om Prakash Sharma

Aug 5, 2010

Dear Sir,
In the previous post I talked about raining money from a helicopter,Pt Sukh Ram and Nagarwala.This game is mastered by Congress.They how to delay orders,Tenders etc. It is in the portfolio of the Finance Minister to get as much fund as possible to the party fund. If this corruption is to be routed out The Parties funding and expenditure of an individual fighting election should be audited by an Independent Auditor and not by CAG.

<<Prev    Next>>
Equitymaster requests your view! Post a comment on "Can India 'whistle blow' its way into the future?". Click here!