|»5 Minute Wrap Up by Equitymaster|
On This Day - 29 MARCH 2011
India faces challenges bigger than corruption
In this issue:
Trading on the exchange has been suspended.
Television anchors -- the cheerleaders for the rally thus far -- are looking as though they have seen a ghost.
But here's what matters the most- "How have YOU been impacted by the crash?"
If you want to be one among the very few who are geared up for any adversity, then, you need to see this right away!
Hurry... This opportunity will soon disappear forever!
Mobius opines that corruption takes place across countries and not just in India and hence he does not think that long term investments would be hampered as a result. In fact, he is of the view that unemployment, inflation and water are the key concerns for India.
To some extent Mobius is right. Corruption in India is not new with many scandals unearthed in the past too. But India has managed to grow at a healthy pace inspite of it. Unemployment, inflation and water are certainly bigger issues that the government has to deal with. For instance, although India's GDP has grown at a brisk pace, it has not necessarily created employment opportunities as the unemployment rate at the end of 2010 was quite high at 10.8%. And for a country which is largely relying on its demographic dividend i.e. its growing working population for growth, surely unemployment will be a big evil that could seriously dent India's prospects.
Inflation has been a problem for some time now and although the central bank is raising rates to bring it under control, it is not likely to entirely solve the problem. Some long term measures are seriously in order like improving agricultural productivity, investments in adequate storage facilities and the like so that there are no supply shortages. Water harvesting is also another area where India should focus on in a bid to reduce dependence on the monsoons and conserve this precious resource.
Having said that, as long as the government is caught up in scams and scandals, there will be less inclination to do any productive work and so the corruption problem in India at least cannot be entirely discounted.
Data Source: The Economist
Little wonder, even Warren Buffett feels the same way. He has argued that investors should avoid long-term fixed-income bets in US dollars because the currency's purchasing power will decline. "If you ask me if the US dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not," he is believed to have said. He concluded that he would much rather own businesses. Our view too is not very different.
Now let's hear what the World Bank President has to say about this. He says that the MENA region turmoil will not trigger another global financial crisis. As a side note, he adds that the impact will be limited to rising oil prices.
Wow! That's such a sweet logic. Rising oil prices don't matter much really. They only fuel inflation. They only undermine corporate profitability and in turn investments. They just deter consumer spending. And they only add to government deficits. That's all that rising oil prices do. The gentleman is so right in pointing out that there is no threat to the global economic "recovery". How we wish everything was so simple!
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