Why is India in the bad books of Jim Rogers? - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster
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Why is India in the bad books of Jim Rogers? 

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In this issue:
» The gold rally may not be over just yet
» Are we staring at a global bank run?
» Small brokerages in India start folding up
» US should take pharma lessons from India
» ...and more!

---------------------------------------- Did you miss the Webinar? ----------------------------------------

Equitymaster's Webinar on the Future Prospects for the Indian Economy with Mr Ajit Dayal was broadcasted on 30th of December, 2011.

The webinar answered questions that could be troubling any Indian Investor today. Where is the Indian Economy headed in 2012? Is Gold still a good investment? Could the Stock Market touch the 21000 figure in 2012?

If you missed watching the webinar, here is your chance to access the same.

Click Here to watch: Indian Economy - From Darling to Damned (Rebroadcast)

And let's understand what lies ahead for India and how could this impact your investments.

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00:00
 
A hard-to-miss poster that we read every day on our way to office is these days wishing people a more prosperous and a low inflation based 2012. There can be no doubt on the first part of that statement. With GDP expected to grow in the region of 7%, we will certainly get more prosperous as the year draws to a close. But is prosperity all that is to wish for. What has this prosperity brought us? The quality of our life is not getting any better. Our cities are getting more crowded, waters increasingly polluted, infrastructure everywhere is splitting at the seams and traffic snarls are becoming a recurring nightmare. In fact, the list about how our well being has not improved at all could go on and on.

Thus, how would one reconcile the fact that while we have gotten enormously more prosperous over the years and our GDP has increased manifold, the overall well being has just not kept pace? The answer perhaps lies in the quality of our GDP growth we believe. And from the evidence at hand, it does seem to be that of inferior quality. That this is indeed the case has also been confirmed by none other than the ace investor Jim Rogers. In an interview with a leading daily, Rogers lashed out at the Indian government saying that it just keeps spending other people's money. However, he did not stop at this. He further commented that India is one of the worst places in the world to do business and that it is a bureaucratic nightmare.

We are of the view that there is certainly a close connection between what Rogers has said and the overall poor quality of our growth. You see, the real long term drivers of any economy and the well being of its people are the businesses and entrepreneurs and if their development is hindered, long term sustenance of the growth comes under real threat. Of course, GDP growth can certainly be boosted for a few years by Government spending and its tendency to put money into the pockets of people so that they go out and spend but such a growth does not have a firm footing. It lacks the robustness of an investment driven growth model. It does not take too much of a stretch to imagine that every dollar spent by Government towards subsidies and other such wasteful expenditure is much better utilised by spending it on improving India's infrastructure and sprucing up its R&D. Little wonder, Rogers is of the view that India will become exciting only if the Government got its act together.

Do you think Jim Rogers is right in calling India one of the worst places to do business? Share your views or you can also comment on our Facebook page / Google+ page.

01:26  Chart of the day
 
No one is keen to sound a death knell for the US dollar and the debt denominated in that currency. At least not yet. Today's chart of the day highlights how risk aversion has once again led people to flock to the safety of the US treasury bonds. As the chart shows, the US 10-year bond emerged as the best performing asset class amongst global asset classes, posting gains in excess of 15% in 2011. While emerging market equities found no place on the chart, their debt did show up as one of the best performing asset classes.

Data source: Businessinsider.com

01:55
 
Has gold's eleven year long golden run ended? The precious metal gained all of 10% last year. But even Santa Clause could not bring cheer to the metal in December. The metal was down 10% last month, erasing some of its gains over the rest of the year. So does this mean that gold's bull-run is over? Well, maybe not. Negative sentiment still prevailing in the economic environment makes the case for gold all the more appealing. Short positions are flooding the market, which means that most people are expecting gold to see a further fall in price. However, according to veteran gold bug Peter Schiff this climate makes gold ripe for a rally. He believes that gold bullion may revisit US$ 1,900 an ounce in 2012. A contrarian bet right now on gold may just pay off over the long run.

02:22
 
The recent stock market volatility has hit this business so badly that it had to finally shut shop. We are referring to the business of small stock brokers. Dwindling cash market volumes and replacement of manual day trading by algorithm trading has hurt the business of small brokers. These brokers typically earned their revenues through day trades executed by the investors. They were in the business of making quick money in the markets. But the introduction of machine trading has reduced such opportunities. To add to this, investors themselves have become wary against trading due to the uncertainty and volatility that has gripped the stock markets. As a result, the brokers have been suffering severe losses. The bigger names have managed to remain in business mainly thanks to alternate revenue streams. But, the smaller ones have had to throw in the towel and bow out of the rink.

02:49
 
A couple of months back, leading global brokerage house MF Global went bankrupt, marking the biggest bankruptcy of 2011. Though Indian investors may have no direct connection to this, it would be worth knowing how the bankruptcy happened and how it was dealt with. The reason for the bankruptcy was plain stupidity. The firm was making bets 100 times the size it could afford. Then the European sovereign debt crisis struck and the bets went bad. Simple old story.

But there's more to it. For over a week after the bankruptcy was filed, the firm's 40,000-odd customers weren't allowed to access their accounts. As a result, they couldn't sell off and endured huge losses. Now, every investor deposits money with his broker which he then uses to do his investment transactions. The brokerage firm has no right over this money. But as it turned out, MF Global looted away its customers to pay off its creditors such as JP Morgan. Even worse, the authorities that handled the bankruptcy filed it in such a way that customers would not get back their money. This kind of trend is being witnessed across the globe. Authorities and central banks seem to be acting almost always on the behest of big banks and big corporates, while trampling over the interests of the masses.

03:29
 
There's 'abnormal', 'subnormal', 'paranormal' and 'new normal'. For the uninitiated these are terms commonly used by the media to describe the changing economic scenario ever since the world financial system went into a state of flux in 2008. The last term was in fact coined by his colleague at PIMCO, Mohamed El-Erian. But Bill Gross has gone a step further to predict that the new normal in 2012 will be far scarier than that in 2011.

In his latest investment outlook note Gross has explored two possibilities for global markets in 2012. One where growth rates and interest rates will remain near zero. The other where there will be central bank induced inflationary expansion. In both cases, he believes that investors should adjust their expectations of real returns to low single digits. If such a scenario were to pan out, we find it difficult to understand why foreign investors should not once again flock back to emerging markets like India where the real returns (adjusted for inflation) are far more attractive.

04:16
 
Rising healthcare spending has always been a big worry for the US. Which is why the country passed the Hatch Waxman Act way back in 1984 to enable companies to launch cheaper generic versions of branded drugs after patent expiries all with the aim of reducing healthcare costs. The law was a boon for the Indian pharma industry, which had already been selling generic drugs in India and had an opportunity to do in the US. The result being that many Indian companies have already established a strong presence in the highly competitive US generics market. Proof of which is also evident in the fact that partnership deals between MNC pharma players and Indian companies have increased in recent times as the former also look to capitalise on the generics opportunity.

But India is not just resting on its laurels of being a force to reckon with in the generics space. Certain companies are focusing on medical innovation too at a lower cost and the US opines that this is where the world can find inspiration from. Case in point is Biocon, which is a leading company in India in the biotechnology space. The company has always harboured ambitions of investing in research and development (R&D) and bringing innovative medicines to market at an affordable price rather than just relying on cheaper generic alternatives. More such instances would certainly entrench India's position on the world map as a leading healthcare provider.

04:45
 
Meanwhile, indices in the Indian stock market have been quite volatile today but are nevertheless trading in the positive. Sensex was trading higher by 50 points at the time of writing. Heavyweights like Tata Motors and ICICI Bank were seen driving most of the gains. The other Asian indices closed mixed today.

04:55  Today's Investing Mantra
"I am a great optimist in life; otherwise I would commit suicide in view of the kind of governments we have nowadays" - Marc Faber
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22 Responses to "Why is India in the bad books of Jim Rogers?"

Chris

Jul 29, 2013

Yes what Jim Rogers said is 100% true and I agree with his statement, only GOD can save this country from all the corrupt politicians, they are not interested in the welfare of the country and the people, only in the interest to loot the tax payers money.

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dilip

Jan 9, 2012

well said.I endorse the views of Jim Rogers.I do not know ,when we will do some serious working rather fooling around and justifying our inaction.Our poltician alongwith bueracates will go on making 2010,2020,2030,2040 & 2050 plan that India will be world super power.But every passing day becoming corrupt and more corrupt.we have large number of people and goverment is borrowing and RBI is printing new notes to increase supply of money and distributing to public in the name of food secutity,fertiliser & fuel subsidy,spending of money in bogus public scheme and shared between poltician &Dalal.Aam Adami should now wake up & throw out these double standard people.

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G.P.Sangal

Jan 7, 2012

I entirely agree. We are under control of inept bureaucrats and corrupt politicians.

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Radhakrishnan

Jan 7, 2012

What was known to every Indian, all along, is now known to others outside India also. It is no more a secret. Bet our politicians/ finance wizards in the government would not only object to this comment from Jim but would come up with some ingenious explanations & astronomical promises( that is the only thing we can expect)that would never be kept.That is the Indian Magic - "promises mean that it has been delivered"- in virtual reality, where the majority of Indian Voters live. Saare jahan se achha hindustan hamara.
Jai Hind

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Sarat Palat

Jan 6, 2012

What Jim Rogers saying is 100% corrrect

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Puccaghati

Jan 6, 2012

Jiim Roggers is a Chinese agent: his daughter has a Chinese Nanny who teaches her Mandarin- one of the worlds most primitive languages -, but so does Priyanka and Rahul ! If we had good governance and NOT Nehru Governance would we have Sonia and Rahul or Gadkari and Advani or Mamata or Maya or Karuna nd Kani or Brinda and Karat ? Or our IAS or North Indian Army Navy and Airforce who spend all their time in cheating on their birth dates ( endemic in North and East India ) occupying Land all over the country and runningaway when the fighting begins as in 1962 ?

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Surya Narayan Sharma

Jan 6, 2012

"There is nothing good or bad in this world,it is only our feeling"."If i am good, everything looks good and vise versa"

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ganeshan

Jan 6, 2012

Jim Rogers is more than 100% right in his views about indian government. It is a pity that our government is taking away money from hard-working individuals, and lavishing it on rougues, and thieves aka politicians, and lazy people who do not want to work but need food, and shelter at others expenses. Unless a stringent law is brought about like in Singapore, we, in India, can never dream of prosperity. Only people like us,who work hard to earn every rupee, will be swindled by the government by way of taxes, duties, etc. and provide it to politicians and beggers.

Like 

Aniruddha Deshmukh

Jan 6, 2012

Agree with criticisms and reject any excuses. We can't even handle China who dumps 40 Bn $ worth goods while arming Pak with nukes against us- and yet our Govt wants to tell us our one sided friendship is strategic.

Like 

N>Thiruvengadam

Jan 5, 2012

Yes but with very shamefull ugly face we have to accept.
But not the politicians only all our people are corrupted
The total system to be changed from the childhood.
It should be done from the begining of ealy school days.
The politicians and corrupted officials will give there mother also for money. Nothing else to say

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