Does India need its own Margaret Thatcher? - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster
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Does India need its own Margaret Thatcher? 

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In this issue:
» The shocking inequality in the US
» Do we need regulators like these?
» Cash transfer scheme's tepid progress
» Best performing FMCG stocks
» ....and more!




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00:00
 
How many people have the courage to stick to one's convictions in the face of tremendous resistance? The list will not be very long we believe. Is it any wonder then that the names of such people pass down the ages? We are sure that Margaret Thatcher, who lost her battle to life earlier this week, is certain to make the cut. To be fair, we knew very little about this longest serving British Prime Minister of the previous century up until her death. But after poring through various articles written in her honour, we can't help but believe that she did indeed change the world with her distinct brand of politics.

And what exactly was her brand of politics? Well, as an article in The Economist points out, it could be summed up in three lines that she borrowed from Lincoln and kept with her everywhere she went. The lines read:

"You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift. You cannot help the wage-earner by pulling down the wage-payer."

Everything Thatcher did after taking over as the Prime Minister of England had its roots in the above mentioned quote. Thus, to do the right thing is indeed praise worthy. But to do it in the face of impossible odds is something entirely different. And this is precisely the reason why the lady is admired so much. When she took over, Britain was literally in the arms of socialism.

And she immediately went about freeing it from its evil clutches. Thus, what followed was a long struggle towards taking the country on the path of reforms. That the journey was extremely tumultuous would be akin to stating the obvious. Things went to such a pass that at one point in time Thatcher even become the most hated figure in her country.

And why not. As FirstPost points out, her policies led to nearly 10,000 businesses going bankrupt and interest rates going as high as 22%. But she knew that whatever she was doing was in the long term interest of the country and things would soon start looking up. And look up they did. Her belief in free market reforms and minimum Government interference starting having the intended effect. Soon inflation came well under control and for the first time since about 1960s, the British economy ran a fiscal surplus. It thus set British economy on a long term path of high economic growth.

If you are thinking that India too is currently going through the same problems as Britain when Thatcher took over, you are not alone we believe. Like in Britain back then, we too are suffering from issues like lack of reforms, high inflation and persistent fiscal deficits. More importantly we seem to be suffering from a lack of leadership that would take decisions in the long term interest of the country without worrying about the near term consequences. Thus, what we need is our very own Margaret Thatcher. But is there any such leader on the horizon yet? Well, our guess is as good as yours.

Do you think we need our own Margaret Thatcher to take us out of the problems we are facing? Please share your comments or post them on our Facebook page / Google+ page

01:52  Chart of the day
 
15%. This is the return that the Sensex has given in the last five years on an absolute basis. In a world of high inflation, these returns can be termed as good as flat. But this doesn't mean the entire stock universe has performed badly. There have been quite a few stocks that have given handsome returns during the same period. FMCG stocks would certainly top that list. Thus, today's chart of the day highlights the five FMCG stocks from the BSE FMCG index have been the best performers. Topping the list is Godrej Consumer Products which is up more than 6-fold. Others haven't done badly either. However, with valuations of most of these having inched up higher, it is unlikely they would give similar returns in the next five years.

Source: Ace Equity


02:29
 
Alarming rise in income inequalities is one of the biggest dangers in the world today. It is bad for economic growth. And it also leads to socio-political instability. We came across a shocking presentation in Business Insider about the distribution of wealth in the US.

The article relates an interesting survey carried out by two renowned professors. They asked 5,000 Americans about what they thought was the actual distribution of wealth in the US. In addition, they were also asked to suggest the ideal wealth distribution.

The results showed that the average American had no clue how serious the problem of income inequality was. Here are some very disturbing statistics. The top 1% of Americans control nearly 40% of the country's total wealth. At the other extreme, the bottom 80% together own merely 7% of America's net worth. The wealth inequality in the US has never been so worse since the 1920s.

We have all seen the way the US policy makers have responded to the financial crisis and its aftermath. It gives us the impression that they don't seem to care much about this cancer-like disease. On the contrary, they have diverted substantial public money to bail out their cronies at too-big-to-fail institutions. Given this, we are sceptical the US government would do anything until it's too late.

03:13
 
The 2014 general elections are just a year away. The political climate is heating up. The incumbent government has been mired in a slew of controversies relating to corruption scams and policy paralysis. It is now struggling desperately to win back the faith of the electorate. One of the populist gimmicks that it resorted to was the direct benefit transfer scheme. As you may know, the beneficiaries of various schemes would directly get cash transfers into their bank accounts. Many saw this as a game changer for the UPA.

But as is the case with all grand ambitions, all was good only in theory. Real success can come only through efficient and timely execution. And this where the government gets to see the mirror! Barely into the first phase, the direct cash transfer scheme is progressing at a very tepid pace. In fact, the Prime Minister has himself admitted that the scheme is facing "many operational issues" and that the first phase has exposed the "poor nature of tracking and monitoring systems we have in departments."

Consider some of the facts reported in the Economic Times. About 78% of the currently eligible 16.6 lakh beneficiaries have bank accounts. And 32% of them have also been granted a unique identity number (UID). Despite this, Aadhaar numbers of merely 4% of 16.6 lakh beneficiaries have been linked to their bank accounts.

This is exactly what happens when purely political ambitions take precedence over all other matters of national interest.

04:03
 
In Indian context, we can name only one regulator that has answered the call of duty time and gain. That is the Reserve Bank of India (RBI). The central bank has had the fortune of being chaired by the likes of Dr Y.V Reddy, Dr Bimal Jalan and now Dr Subbarao. These are individuals who have had the conviction to go against the norm. They neither bowed down to the temptation of reckless money printing. Nor did they cede to the political pressure to cut interest rates. Instead they stuck to being conservative and careful about regulating the banking sector. Now these are not attributes that help you win positions in consultancy firms paying fat bonuses.

Hence we were rather intrigued by an article in Bloomberg talking about Mary Schapiro. The lady in question is the former chairman of the SEC. Interestingly after her exit from SEC; Schapiro has joined a consultancy firm. In the author's words, one that does nothing more than sells the knowledge of Washington's regulatory thicket to the banks. Schapiro's career from Financial Industry Regulatory Authority to the SEC to the consultancy firm has an interesting trail of riches. With such individuals heading regulatory institutions, one wonders in whose heart investor interest lies.

04:45
 
Meanwhile, indices in Indian equity markets are trading volatile today with the BSE-Sensex higher by around 70 points at the time of writing. Realty and IT stocks were attracting the maximum interest. While Asian indices closed strong today, Europe too is trading in the positive currently.

04:55  Today's investing mantra
"The true investment objective of growth is not just to make gains but to avoid loss" - Philip Fisher

Editor's note: We are pleased to inform you that we have introduced a new section called 'What We're Reading'. Here, you can access some interesting articles across the web that we liked reading.
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11 Responses to "Does India need its own Margaret Thatcher?"

krishnan

Apr 15, 2013

Who else but Narendra Modi?

Like 

P MALINI

Apr 13, 2013

Yes i do think we need a person like MArgret Thatcher.... the one in my mind is "Mr Modi"... he is already implementing the same in Gujarat... we are witnessing the progress and growth in gujarath.... the Country needs a leader like her... we are longing for such a leader...

Like (1)

R N Gandhi

Apr 12, 2013

You said that the gap between the rich & poor is widening in USA.It is very true. And we also have the same trend in India. Additionally our small traders and industrialists are also losing their business to malls and capital based big industries. It appears that the ruling party does not have any anxiety about this fact. Just as we do not find small traders and industries in USA which is a capitalist country we follow the same trend in India and this may further widen the gap between the rich and the poor in India too.

Like (1)

Gangadharan Nair

Apr 12, 2013

Yes we, the Indians need a leader like Mrs Thatcher. But what about the type of Democracy we follow? We elect around 3 million people to power which makes a financial burden on the country and that is the only reason for Deficit Budgets. As long as we do not change our system of democracy to Presidential form of Government no body, forget about Mrs Thatcher, not even the father of all Gods, Muthubhattar, can save India.

Like (1)

kevin john

Apr 11, 2013

Rather than have an iron hand we require a government which has an absolute majority to take the necessary decisions Somehow all over the press we have been blaming the current PM for all the problems labelling him weak incompetent etc conveniently forgetting that it wsa he who was the architect of all reforms leading to the growth we experienced in the last decade. As such it is my opinion that we must vote a majority govt.

Like (1)

thomas pooppally

Apr 11, 2013

we have our own thatchers

Like (1)

Shashank Tilak

Apr 11, 2013

That is a sure thing. India does need one - someone who has strong convictions and is also able to control the flock of dumb, stupid or downright incompetent that forms most of current political class. Unfortunately most of the political class is either concerned with being 'Secular' (with questionable attributes) or being a messiah for poor - while amassing personal wealth in thousands of crores. The fourth estate (Electronic media in particular and any other media in general) is also quick to pounce on these pseudo issues rather than what will really help the country. That is the unfortunate state of affairs. There is nothing more than hope that anyone with reasonable thinking power can do.

Like (1)

kk panda

Apr 11, 2013

India need Sir Mr Swaraj Paul in planning commission,watch his interview with lok-sabha tv last few days back.

Like (1)

VINOD MAHAJAN

Apr 11, 2013

There is no denying that India needs its own Margret Thatcher.The present trend of indecisiveness and laissez faire is extremely dangerous for the country and it will lead to its ruin.It is high time that somebody takes bitter decisions in the interest of the country and forget about electoral politics.The country is above everything else

Like (1)

viney

Apr 11, 2013

you could not have picked up a better disaster model for India to consider. MT was a fine human being but her economic prescriptions belonged in the past. do you see UK changes its PM every 10 years or so since WWII..
Times have changed, place of UK among nations has declined.. economic competitiveness is gone...acceptance is coming very very slow..

a more better choice/disaster would have been MT's own mentor..winston churchill

do not make your opinions reading economist or other such writing.

viney
because . ..

Like (1)
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