|»5 Minute Wrap Up by Equitymaster|
On This Day - 28 FEBRUARY 2012
Is this government scheme killing rural jobs in India?
In this issue:
He's the world's most successful investor.
Your guess is right.
The Warren Buffett Quiz. Click Here to participate.---------------------------------------------------------------------------------------------------------------
Almost eight years later, many of these concerns still remain and some more have come to the fore. The scheme has been attacked for many reasons. Some of these are bloating rural wages, corruption, lack of asset creation for money spent, and making farming uneconomic. But the real problem is that the scheme may be destroying the work ethic and jobs in general. According to a research paper by the Indian School of Business (ISB), the scheme has done its bit to alleviate poverty. But it is also raising people's dependence on government and killing off micro enterprises. The data provided by the National Sample Survey Office also paints a telling picture. Between 1999-00, there were 92 m small jobs created. This figure stood at a paltry 2.2 m between 2004-05 and 2009-10. Not just that, during the latter period, there were 27.7 m new jobs created, which was offset by a drop of 25.5 m in the self employed.
Is this such a bad sign? After all, the drop could partly be explained by more people pursuing higher education. Or more women dropping out of the workforce altogether. Also, people cannot be blamed for opting to quit tough farming jobs for employment under the NREGA. This then raises the question whether jobs under the NREGA are productive in the first place. Are they adding much to the growth of the economy? With corruption ruling the roost, one would hardly surprised if many are getting paid without doing any work at all.
The government's intention behind this scheme to eradicate poverty can be appreciated. But maybe it is time now for the same to undergo a serious overhaul. Already the government's finances are under tremendous pressure. Thus, allocating vast sums of money to schemes which are not contributing much to the overall economic growth and improvement in standard of living does not bode well in the long run.
Do you think the NREGA has done a good job in reducing poverty in India? If so, do you invest on the basis of their fundamental strength or go by the movement in prices? Share your comments with us or post your views on our Facebook page / Google+ page.
Conglomerate discount is nothing but a discount that is given to the share price of conglomerate companies as opposed to smaller, more focused companies. This is because the latter are believed to be more nimble, more transparent and easier to compare with peers. The whole study is rather redundant we believe. For valuations depend on factors like competitive advantages and the management of the firms. The fact that a firm is a conglomerate or a standalone entity does not really matter. As long as it will continue to create value for shareholders, growth in stock price will follow. The rest should be discarded as mere noise as per us.
A number of big names in the banking space such as UBS, Credit Suisse and Morgan Stanley could see their long term credit ratings drop by three notches. Barclays, BNP Paribas, Deutsche Bank, Goldman Sachs, etc could see a two notch drop. Out of the 114 European financial institutions being downgraded a number of them are in Italy and Spain. A few are in France and Germany as well. Investors and companies alike are paying heavily for Government excesses. And there seems to be no end in sight or no real solution in the offing.
No doubt, India has potential to become the third largest economy in the next two decades. However, all this definitely calls for an agile and proactive leadership at the centre. Without this, it may take longer than the set timeline.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement
Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.
This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.
This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.
This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407