India growth story miles away from here

Dec 3, 2010

In this issue:
» Another scam? SEBI bars 4 firms for rigging prices
» Government IPOs are not all as good as they sound?
» US to face double dip recession: United Nations
» 'Don't fight ECB': Trichet warns of the strength of EU
» ...and more!!

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There is a scam here. There is a scam there. There is a scam everywhere. First it was the Adarsh Housing scam, then the infamous telecom scam, then the bribery scam and now the price rigging scam. India is no stranger to scams.

But even worse than this is the economic divide that is plaguing the country. While some people are filling up their pockets with the fruits of these scams, others are starving for even a meal a day. We are referring to the huge population of the country that is still residing in the slums. As per the government's own estimates, the number of people living in the slums is likely to cross 93 m by 2011. This is a whopping increase of 23% since 2001.

The main reason that has been cited behind this 'spectacular growth' is the large influx of people in cities without commensurate job opportunities as well as the lack of housing and basic amenities. The cities are fraught with higher cost of living as well as higher cost of housing, transport and education. Add to this lack of adequate housing land and also infrastructure and one knows why there is a spike in the slum population of the country.

The government now plans to work with the state governments to provide adequate housing facilities to slum dwellers. But we ask, why were these provisions not made earlier? Was it really more necessary to sell land for luxury homes at exorbitant prices? It must be remembered that these land sales are what led to the birth of so many of the current scams.

It is a matter of pride for us when we are counted amongst the top growing nations in the world. But it would do the government good to remember that the country would grow only if its people do. And the people include even the poor, not just a handful of the elite few.

Do you think the government has done enough for the poor segment of the society? Share your views.

 Chart of the day
The crisis that has hit the western world has shifted the spotlight on the emerging economies. Their growing economies have put them ahead of their western counterparts. As a result, it would be no surprise to know that the cities with the fastest growth in income are predominantly in the emerging countries. Today's chart of the day shows that of the five cities that had the fastest growth in income (from 2009 to 2010), at least four were from the emerging markets. The lone city from the developed world to have made it to the top five is Singapore.

Data source: The Economist

The season of scams and scandals doesn't seem to be going away anytime soon. Forget politicians, even Indian companies are seeing skeletons fall out of their cupboards. We are talking about the latest issue that SEBI has raised. The stock market regulator has barred four listed companies for rigging their stock prices. These are Murli Industries, Ackruti City, Welspun Corporation and Brushman India. While these are no big names in the corporate world, their misdoings are still indicative of the disrespect that some company promoters have for ethical standards of operations.

First Coal India and now Manganese Ore India Ltd. The investor response to these two IPOs has been nothing short of breathtaking. And why not? Not only do these companies have strong competitive advantages and come equipped with rock solid balance sheets, but their pricing was also done at some very attractive levels. Little wonder, both FIIs as well as domestic investors queued up to get more than their fill of these companies.

Fortunately for investors, the IPO pipeline for the Government of India is choc a bloc this fiscal. And many more issues are lined up. But do all of them come equipped with the same quality as say Coal India or MOIL? We have our fair share of doubts. Take for e.g. the impending FPOs of ONGC and IOC. There is no doubt that both these companies are also titans in their respective fields. But it is the Government's repeated interference in their business affairs that makes predicting their future a difficult task. Thus, these issues are a pointer to the fact that investing in Government IPOs is not a one way ticket to riches. Picking and choosing would indeed yield better results than investing just blindly in the so called Public Sector Undertakings.

The United Nations has quite a bleak outlook on the US. It opines that the US may suffer a double-dip recession and see unemployment rise to 10% next year unless the Obama administration gets its act together. Interestingly, the UN believes that the way to come out of this hole is through more stimuli: something that most economists around the world are averse to.

We beg to differ. More stimulus will only lead to more printing of paper money and hence, a fall in the value of currencies. The UN believes that the key to recovery is an international agreement for a coordinated stimulus. But because there has been a lack of the same, the organization has been compelled to lower projections for US and global growth in 2011. The world economy is expected to grow by 3.6% this year and slow to 3.1% in 2011, according to the UN. Similarly, US projections for 2010 and 2011 were revised downward to 2.6% this year and 2.2% for 2011. Europe is also in a precarious state as debt issues have loomed large. Indeed, it will be a while before any full fledged recovery emanates either from the US or Europe.

China's gold import increased fivefold this year. The size of the imports for the first 10 months of the year stood at 209 tonnes as against 45 tonnes last year. This has turned the largest bullion miner into a major overseas buyer for the first time in recent memory. The surge in demand for the yellow metal has come as Chinese investors look for insurance against rising inflation and currency appreciation. Also, gold seems to be a better and safer option compared to equity and property markets. This puts the dragon economy on track to overtake India as the world's largest consumer of gold and a significant force in global gold prices.

The rise in Chinese demand could further inflate gold prices. Bullion hit a nominal all-time high of $1,424.10 a troy ounce last month. But adjusted for inflation, prices are still far off from the 1980 peak price. Chinese total gold demand rose last year to nearly 450 tonnes, up from about 200 tonnes a decade ago. Analysts anticipate a further leap this year, putting the country within striking distance of India's total gold demand of 612 tonnes in 2009.

The Euro zone has been facing the possibilities of contagion triggered by the debt problems in its member countries. The market traders and experts have been sighting possibility of a collapse of the single currency zone. However ECB President Mr. Trichet has warned the traders of underestimating the governments of the zone. He has hinted on a possibility of quantitative easing through issue of bonds in order to combat the crisis that the zone is faced with. Member countries, especially Germany, have been quite vocal of not being keen on a major bond issue in the zone. Whether any such plan would actually be carried out or if it is just a threat hoping to revive confidence in the financial system is something that remains to be seen. However, it is important to note that a bond issue would definitely help to stem the growing crisis in major countries like Spain and Portugal

In the meanwhile, the Indian markets were hovering around yesterday's closing levels during the post noon trading session. At the time of writing, the BSE-Sensex was trading lower by about 34 points or down by 0.2%. Stocks from the real estate and metal spaces were witnessing selling pressure at the time, while those from the IT and auto spaces were amongst the top performers. Other Asian markets ended the day on a mixed note. While Japan and Hong Kong ended on a firm note, China ended marginally lower.

 Today's investing mantra
"The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase." - Benjamin Graham

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41 Responses to "India growth story miles away from here"


Dec 4, 2010

Our consecutive Govt performance in resolving housing problem is abysmal. It is not inclusive, the policy was done to serve the elites of the society.



Dec 4, 2010

The government has done nothing for the middle class/lower middle class and BPL people, which will be evident from the growth of high net worth individuals/industry houses and the common man.


Sarat Palat

Dec 4, 2010

We all know that the growing population is the biggest challenge we face currently. The Government should implement policies regarding this. This could be in the form of awareness or rules. There is a limitiation for the Government in providing proper houses and sanitation facilities. Moreover, it is the duty and responsibility of each and every individual to think and act to come out of this situation.



Dec 4, 2010

All that the Goverment is doing for the upliftment of Poor stays on paper. Red Tape and bureaucracy ensures all that is allocated to poor as subsidies gets into their pockets and poor becomes more poorer, Inflation is another snake which hangs in the neck of all the poor and middle class which is eating away all they earn, as systematically Goverment allows exorbitant prices on essential food items like wheat, rice, pulses, vegetables, fruits, compare it what farmer gets and the retail price ratio is more than 200% to 500% , when farmer brings the crop our agencies make sure there are no monetary gains for the farmer and entire crop is hoarded for future gains,why at first we have statements from the ministers that our food situation is comfortable and we have enough stocks but once the arrivals of crop is over in 4-5 months stories start floating that we have shortage of pulses, onions, potatoes etc etc and than the people who earlier exported the crop at throw away prices are allowed to import back the same products at exorbitant prices and every thing is justified in the name of international scenarioand shortage in our country.Why we dont build infrastructure to store these commodities and ensure efficient distribution system, why we impose toll taxes, restrictions on agri products flow from one state to another and do not provide easy assess to direct consumers.Why Govt run veg shops are managed so shabilly.
Another reason for this slum tide is the so called employment which our pvt sector is generating just go and do a small survey of the pathetic salary levels.Starting salary of Rs3000/ in super markets , Rs 5000 to Rs7000 in BPOs/ call centers whereas so called companies earn US$2000 to 2500 for the same job , why there is race to hoard profits and declare more and more profits on Stock exchanges every quater why cant they share some more money with the employees who bring in all the business to the company.If we think by paying Rs3000-Rs5000 salary our corporates are doing great favour to unemployed youths than we are absolutely mistaken, with todays food prices and cost of living no body can dream to survive with this type of pathetic salaries. I hope labour reforms if at all happens also looks at this aspect instead of just giving in to the demand of industry to relax labour laws which are never implemented. All these factors are sole reasons for the boom in Slums in cities. I know nobody wants to know the facts but facts will remain facts.All this higher GDP growth talks will not bear fruits if we do not learn to share our profits with every citizen of the our country and if one goes by the available figure it seems 80% of the benefits are going to 1% of the population and rich are becoming filthy rich and poor are becoming poorer.


V S Gurumani

Dec 4, 2010

Clearly, the Indian government does not know how to help the poor! Or is the reality a little more complex? The investments in anti poverty schemes--dozens of them can be counted--are meant to pull the wool over our eyes, especially those of the poor. Example: the proposed Food Security Act, which is being touted as a solution by so many self professed development scholars like Jean Dreze will do nothing to actually provide any food security for the poor. It will only serve the interests of middlemen and contribute to further food price distortions, both of which will hurt the poor. The same is true for slums. If cities are planned taking the reality of their land use into account, solutions can be found for the poor. Our governments take a short sighted view of urban requirements and end up constantly reacting to problems rather than anticipating them. There could be a design here, too: the enrichment of slum lords all of whom are affiliated to one political party or the other!


Shardul Pasawala

Dec 4, 2010

To the misfortune of billions of Indians, Corruption has always been a main agenda of Congress, whenever in power. What BJP or other parties are doing is not a prime concern. But in time of Congress Rule corruption has always been at peak. So let us not ask or reply whether Government has done enough or not. Government can't.......



Dec 3, 2010

India is spiralling down because of its uncouth twists facts to gain TRPs and ends up gaing money for themselves but falling reputation for India in international circles! Earlier only a hush hush in various high end parties, now every man , woman and child on street knows the level of integrity most of the media-persons hold. From now on, any allegations by the media must be confirmed regarding its truthness...because media usually plants the twisted information in a sensational manner for TRPs. Earlier one thought that they "may" do it... but now it is confirmed that their level of integrity allows them to be as uncouth as possible humanely and they "will invariably" sensationalize and misrepresent the facts, plant stories, mislead the nation, blackmail the whole nation on emotional issues, assassinate characters unjustifiably and whatever other means they get, they will use it to suit their pockets or satisfy their lobbies! NO ONE CAN NOW TRUST WHAT UNCOUTH BLACKMAILING, MISREPRESENTING MEDIA REPORTS!


Sharad Ashara

Dec 3, 2010

So far all the schemes put in operation by Govt are designed by beurocrats to cyphon allotted money to their own coffers a scheme for poor is concieved and pushed forward only after this consideration in fact there is a big margin reserved in every government spending for unscruplous people and politicians who are in politics not for governing but for buiseness so much so that mind set of common people have long back come to accept these trend as natural as all are hand in hand and under protection as seen from number of scamsters going scotfree.
There is no one to improve lot of poor , even media shy away from highiliting their plight for fear of losing TRP.


ratna kulkarni

Dec 3, 2010

the government has done a lot for the poor ..but it is the poor who donot want to ge out of their slums...the govt gives them decent accomodation and what do they do it out...the problem is we Indians have never been taught to think of our nations first ...we are alwys taught to think of urselves as an Gujarati ,Maharashtrian etc and then the subcastes follow ...We as a society are not aware of our social responsibilities to the society at lagrge. i donot know how one can change the attitude of the Indian.



Dec 3, 2010

Dear sirs, Govt plans are nice.But the system must be further strengthened to see no leakages in between till it reaches the poor people.Now it is other way around to see the govt fund reaches safely to the hands of corrupt political leaders and corrupt officials.Now it is the high time to correct this bad practice in our country before it is ? wtoo date.But who will do it ? How we are going to do ite have no faith in the present corrupt and selfish political leaders who pay few hundreds of rupees to poor people to get elected again and loot this country indefinitely.Judiciary and press only can educate people not to sell their valuable votes to elect candidate during election.Using the name of democracy political parties cheat the people of this country.Hence political party system must be thrown away and election commission must be given the power to conduct proper exam to all the aspiring candidates and after verifying their marks and merits of each candidate they should be allowed to choose their constituency and get elected accordingly.So that, we can rely on educated and patriotic young people to govern the affairs of govt and pave way for a welfare state.There is no other solution to take away the power from the wrong hands.Thanks.

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