Anna Hazare's solution for the Indian economy - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster
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Anna Hazare's solution for the Indian economy 

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In this issue:
» US government to shut down?
» Indian banks raise capital from new avenues
» Dubai property 60% cheaper than Mumbai
» India to ink free trade pact with EFTA
» ...and more!


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00:00
 
"Corruption" may have been the most repeated word of 2010-11 as political and corporate scams sprawled across the Indian landscape. But something seems to be changing now. The chorus against corruption is amplifying. And the movement has found a face in Anna Hazare, the man who had earlier led the movement for the Right to Information Act (RTI).

But there is another important yet lesser known story about this Gandhian reformer that we believe has critical solutions to the Indian economy and the world at large. The story dates backs to the 1980s in a barren village called Ralegan Siddhi, located in the Ahmednagar district of Maharashtra. The drought-prone village was plagued by a perennial water scarcity. Almost 80% of the villagers were dependent on other villages for food grains. Many folks had abandoned the village in search of work elsewhere, while others opened liquor dens to sustain themselves. The social life too, as a result, was very turbulent.

Then a native of this village returned after serving the Indian Army. He decided to transform his village and to make it self-sufficient. All he had was will and wisdom. He started various programmes to conserve water and prevent soil erosion. The principle of his ridge-to-valley model was to hold the rain where it fell and to use that water to build the economic base of the village.

It worked! By the 1990s, the village turned around 180 degrees- from barren to green, from dependent to self-sufficient. Income levels had risen substantially. Over 25% of the village earned more than Rs 5 lakh annually. That was a time when the super-rich in India were defined as those who earned more than Rs 10 lakh annually. Even more important, the income disparities were low.

The success of Anna's self-sufficient eco-village model shows that ecological and natural wealth can create well-being and economic growth. At a time when the global economy is gripped with economic and environmental disasters, Anna's solution is what the world must be looking at.

Do you think Anna Hazare has the solution for the Indian economy? Share your comments with us or post your views on our facebook page.

01:17  Chart of the day
 
The crisis in the European economies is very much alive and kicking. Greece and Ireland have already gone for a bailout. Portugal seems to be the next one in the line. And chances are that Spain may follow as well and Italy is not doing too good either. The term "PIIGS" is an acronym used to group these highly indebted economies. Today's chart of the day compares the unemployment rate in these ailing European economies with that of India. The numbers show that India too has a pretty high rate of unemployed people. The one major thing that differentiates India from these economies is the economic growth. But still, our country needs to find ways to fix the issue of unemployment. Otherwise, our long term growth may be severely hampered.

Data source: CIA World Factbook

01:56
 
Now this may sound a little amusing to us but there are strong chances of this event being played out in reality. We are referring to the US shutdown that looms ahead quite dangerously as of now. For the uninitiated, a shutdown is an event where the Government no longer has access to funds and as a consequence, all its activities are put to a halt. To understand some of the ramifications, all the places where the Government has a large presence will have to deal with laid off employees, closed buildings and out of work Government contractors. And this is not all. As the US Federal Government is a very big business in itself, a temporary shutdown would also end up disrupting a lot of private businesses. The reason it has come to this is because the US politicians are fighting over the budget and have been unable to strike a deal. The US Government has till Thursday midnight to try and come up with a solution. Failing the same, a nationwide US Government shutdown will be enforced as per the constitution. Important to add is that this is not the first time the Government is facing a shutdown. It happened way back in 1995 also when the Government was shut down for a significant period of 20 days. Back then, the US economy's growth slowed by a full percentage point for the quarter. A repeat of the same is something that the US economy can ill afford at this point in time.

02:43
 
At a time when capital in domestic markets is getting dearer by the day, Indian banks have to seek alternative sources of funding. They need to ensure that the spreads earned on borrowing and lending money do not get too thin for the entities to survive profitably or grow. At such times, near zero interest rates prevalent in the overseas markets have become very enticing. Also to ensure that their currency risks are hedged, Indian banks have chosen to borrow in non-traditional currencies like the Swiss franc. We do not see any imminent risks to the banks with this strategy in the near term. However, the condition here is that they should not go overboard with their foreign borrowings. Further, too much of cheap capital should not allow the banks to take undue risks in their loan portfolio. As with keeping their overall interest costs low, the same can be done by expanding their CASA (current and savings accounts) base as well. Believe us, there is plenty of scope there.

03:17
 
Mumbai and Dubai are one of the most favored investment destinations for property investors. Both these regions share equal interest amongst investors. So considering that, prices should be more or less parallel across these cities, after accounting for minor differences. However, it is interesting to note that there is a wide disparity in prices between these two regions. Property prices in Dubai are about 60% cheaper than in Mumbai. This is jaw dropping indeed! It is believed that during the hay days a lot of inventory was being build up in Dubai which ultimately was not absorbed due to a slowdown in the real estate market. Subsequently, in order to attract investors the government came out with a new draft of regulations favoring home owners, in order to revive the interest in Dubai's property market. Even the revival of liquidity in the mortgage market has generated interest amongst investors. Thus, we believe the disparity in pricing between the two cities is not likely to prevail for long. So, if not Mumbai, one can well look out for Dubai so as to get a better bargain.

03:54
 
One way of spurring growth of an economy is developing trade relations with countries and India seems to be doing well on that front. The commerce minister has stated that India and the four nation European Free Trade Association (EFTA) are set to conclude the ongoing free trade pact negotiations by the end of this year. The EFTA includes Switzerland, Iceland, Liechtenstein and Norway. The seventh round of talks took place early this year and discussions were held for market access for industrial products, fish and agricultural goods, technical barriers to trade, customs procedures, investment, intellectual property rights and dispute settlement. It must be noted that India already has active trade relations with Switzerland and this stood at US$ 18 bn in 2010. Indeed, free trade in areas such as infrastructure, food processing and biotechnology among others will further help in enhancing India's growth in the longer term.

04:30
 
In the meanwhile, the Indian stock markets are trading flat with a negative bias, after starting the day on a positive note. Auto and realty stocks led the decline, with most other indices also seeing losses. Consumer durables and FMCG stocks were among the few gainers. At the time of writing, India's benchmark index, the BSE-Sensex was trading lower by about 15 points (0.1%). Most Asian indices were in the green. Japan led the gains, even after another earthquake jolt last night.

04:50  Today's investing mantra
"Volatility is a symptom that people have no idea of the underlying value." - Jeremy Grantham
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63 Responses to "Anna Hazare's solution for the Indian economy"

Surya Narayan Sharma

Jan 6, 2012

"As long as human beings are living in this world,it is impossible to irradicate corruption"

Like 

santosh arora

Dec 24, 2011

anna hazare's solution is tried way for the betterment. what he is preaching or directing masses to learn by applying the same in all walks of life. every human is important & as this human of goodness must stand against evil & evil doers to gether & face both fearlessly
i bought a 2bed room flat & paid to CIDCO New Mumbai bldg 18/201 usd107,000 & i am still not handed over my flat. i had been four time by saving some money to meet CIDCO officials & never helped to hand over the flat. the moment they know who i am they go away from office & still i have no flat. Conditions were if i don't pay within stipulated time then i was supposed to pay intrest between 23 to 25% per annum .
i wonder which God i should go for help. this is my country & i was born & raised & leave this flat bldg 18/201 for CIDCO Officials as monument of CIDCO INJUSTICE

Like 

Sankara Narayanan

Apr 20, 2011

Thanks to ANNA HAZARE for converting his village into a self reliant one with the active participation of the people of the region.

If the present day governments at the centre and states were willing to do the same work, ALL INDIAN VILLAGES SHOULD HAVE BEEN FULLY SELF-RELIANT AND EVERGREEN, EVER GROWING CENTERS AND THE UTTER POVERTY COULD HAVE BEEN ELIMINATED BY NOW.

CONGRATULATIONS TO MR. ANNA HAZARE AND THE VILLAGERS WHO ARE STANDING WITH HIM.

ALL ORDINARY INDIANS ARE WITH YOU, ANNAJI, JUST LEAD THEM, THEY NEED SOMEONE WHO IS AS SELFLESS AS YOU ARE.

Like 

Sankara Narayanan

Apr 20, 2011

The Equity Master Team deserves congratulations for finding time to incorporate the sincere, selfless efforts of the Honorable ANNA HAZARE to convert his native village into a self reliant village - that too when only soil was available there. With his farsightedness and the villagers sincere hard work with determination to convert the area into a place worth living, the face of that village Ralegan Siddhi got changed.

LET THE TAINTED CORRUPT POLITICIANS UNDERSTAND WHAT HE HAS DONE FOR THE VILLAGE AND THE PEOPLE LIVING IN THE REGION.

ALL THOSE WHO ARE CORRUPT ARE AFRAID OF HIM AND THE ANTI CORRUPTION DRAFT BILL BECAUSE SEVERAL OF THE SO-CALLED LEADERS AND MINISTERS WILL FIND THEMSELVES DIFFICULT TO DEFEND ONCE THIS BILL IS PASSED IN PARLIAMENT.

UNDER THE CIRCUMSTANCES, THEY HAVE TO SEE THAT THIS BILL IS EITHER DILUTED WITH CLAUSES THAT WILL HELP THEM ESCAPE OR THIS BILL IS NOT EVEN PASSED. HENCE, THEIR REPEATED ATTEMPTS TO TARNISH THE IMAGES OF THE MEMBERS OF THE CIVIL SOCIETY DO COMPEL THEM TO RESIGN ON THEIR OWN.

POOR FELLOWS OF POLITICS, WHO ARE CORRUPT FROM TOP TO BOTTOM, ARE CONTINUING WITH THEIR DIRTY POLITICAL GAMES THEY USED TO ADOPT UNDER ADVERSE CONDITIONS.

Like 

ranbir mansingh

Apr 14, 2011

Anna Hazare is not providing a solution. He is merely giving a tool to us people to bring to book the crooks that govern us.

Like 

Madhukar Chiddarwar

Apr 11, 2011

Anna Hazare has got massive support from all across the society, except the corrupt community of piloticians and beurocrats as also the corporate tycoons, who are the other side of the corruption coin. Corruption and high handedness of the govt and total disregard of the common peoiple by the govt has reached tolerance limits or the tipping point. People cannot take any more and an explosion of peoples anger is waiting to happen. Time is not too far before Tunisia, Egypt and Libya is enacted here, unless the corrupt govt reads the writing on the wall. Piliticians look at the common people as a VOTE BANK and Corporates see them as MARKET and a CONSUMER, no body looks at them as HUMAN BEEINGS. The best part of the Anna Movement is, he got the YOUTH of the nation fired and ignited. Every individual, including the youth has to become intolerant and hit back at every nonsence and misuse of power and the change will happen faster than anybody can imagine.

The Govt and the Corporates, who are at two enda of the corruption chain, keep blaring that India will become a super a superpower, but that will never happen unless the degenerated Basics of morality and values are restored.

The corrupt politicians, the corrupt Beurocrats and the corrupting Corporates are a poison triangle, The Bermuda Trinangle which will swallow the nation unless the rot is arrested by every citizen young and old becoming INTOLERANT and the Good MEDIA lending constructive support to the noble sons of the nation like Anna Hazare and several other Anna Hazares bearing different names but the same spirit.

The Bermuda Triangle of corruption will use all their might to defeate the new force of the people but this is w2hen every individual has to realise the THE POWER within him and put it to use unitedly.

Like 

Manoj Kumar

Apr 11, 2011

Anna Hazare may not have the solution for the economy but he himself definitely is the solution for the Indian Polity and Administration.

Like 

Sahil Aggarwal

Apr 11, 2011

Yes Indeed! Anna saheb has started a movement which can revolutionise the country. But WHAT NEXT!??!

Everyone is saying - "We support Anna Saheb!!", but what next??

He is the spark, but who will light the fire and how??
Dont get me wrong, I am all praises for his efforts and the cause, but how do we make sure that this materialises. Knowing our mob mentality, it shouldnt fizzle out in a couple of months.

Like 

Raymon

Apr 10, 2011

CONGRATULATIONS.............SHREE ANNA HAZARE.YOU WIN OUR HEARTS.GANDHIAN THOUGHTS ARE UNIQUE.

Like 

BOMIS

Apr 10, 2011

ANNA SAHEB IS THE BEST.HE HAS DONE WHAT NOBODY COULD DO.GOD BLESS HIM WITH MORE STRENGTH RO FIGHT THE VIRUS IN INDIA.

Like 
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