These 'lawbreakers' demand a 3-fold hike in pay - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster
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These 'lawbreakers' demand a 3-fold hike in pay 

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In this issue:
» Retail investors to get a bigger share in IPO pie.
» Absence of land acquisition law killing India's infra dreams
» Global economy recovering? The barometer definitely says yes.
» Home finance companies not in a rush to raise rates.
» ...and more!!


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00:00
 
They live in fancy houses and their families drive fancy cars. They have personal wealth that makes them some of the richest Indians. But they are angry that they are not being paid enough. We are talking about our esteemed lawmakers. Our politicians.

The Indian parliamentarians are currently paid an 'official' monthly salary of Rs.16,000. This when compared to their global counterparts is quite low. Even when compared to their peers in the bureaucratic world, it appears low. Therefore, they appear to have a good case when they demand that their pay be tripled to Rs.50,000 per month.

The demand for raising their own pays also comes at a time when the country is battling high inflation rates. Wage escalation is playing a significant role in fuelling these high rates. But the politicians have equated this demand for raise to the stimulus given to the economy in the form of the sixth pay commission. They have sighted that one of the reasons why India did not feel the brunt of recession was the pay raise for civil servants.

After all at the end of the day, we all work for our salaries and everyone wants to be paid at par with the industry standards. Even across corporate India, wages are being hiked. So why not for the politicians? They do work so hard to maintain the law and order in the country. Especially when they throw chairs and pots at each other or stage dharnas and walkouts to suspend Parliamentary sessions.

01:15  Chart of the day
 
Almost everywhere you go, you will be surrounded by a cacophony of people talking. The truth is Indians love to talk. And when phone tariffs are so low, then why wait to meet people to talk to them. This love for talking is visible in our huge mobile minutes of usage per month (MOU). India has the second highest MOUs in Asia, marginally second only to China. Little wonder then that global telecom players are competing intensely for a share of this pie.

Source: Company data from telecom incumbents in each country at the end of FY10

01:59
 
In another move to increase retail participation, the SEBI has proposed doubling the cap on individuals' investments in IPOs. The retail cap in public issues currently stands at Rs. 1 lakh. The SEBI has proposed to raise this to Rs. 2 lakh. The root of this proposal can be found in the lackluster retail participation in recent PSU offers of NTPC and NMDC. Now with Coal India looking to come out with its mammoth IPO later this year, the SEBI is looking to use this ploy to push retail investors to subscribe to it.

Anyways, investment bankers have hailed this proposal (for obvious reasons). But there are some who think this is a flawed thought. Take for instance the view of Mr. Prithvi Haldea, the chief of Prime Database, a Delhi-based primary market tracker. He thinks that the logic is 'bogus'. As per him, around 75% of the retail investors in 2007, when the IPO markets peaked, invested around Rs.50,000 or even less in each public float. The ideal way to increase retail participation, as per him, would have been to increase the retail portion from 35% to 50%.

We agree to this thought. Also, we believe that the SEBI needs to be tougher with companies and investment bankers that bring these public issues to the markets at unjustifiable valuations. Something to take care of this concern would have been a better idea from SEBI.

02:35
 
One of hallmarks of development is a well-functioning justice delivery system. Although the intent behind India's judicial process is honorable, a lot is left to be desired. Take the recent bail of Satyam founder B. Ramalinga Raju. So what if the person involved is one of the biggest scamsters in Indian corporate history? A person who defrauded a listed company to the tune of Rs. 71.4 bn by his own admission (subsequently retracted) will benefit from India's ambitious first world rights and notoriously third world execution. So what thousands of investors burnt their hands in the company or if India's corporate image was sullied. Bringing the guilty to the book has always been an onerous task in India. The question is will it always be so? Share with us, your views on this or post your comments on our Facebook page.

03:07
 
By far one of the greatest conundrum facing India and her progress today is that of land acquisition. The process of the government and the private sector acquiring land from farmers is muddled in controversy and debate. But at the end of the day, land has to be acquired if any kind of physical infrastructure has to be built. Something that is much needed today. The solution remains as elusive as ever though.

As per a Wall Street Journal report, the 2007 bill to amend the 1894 Land Acquisition Act might have prevented some recent heated disputes between farmers and state governments. The bill lays out ways of arriving at proper compensation. It also requires states to set up bodies to quickly address compensation disputes. The bill was passed in the lower house in Feb 2009. However, it later lapsed as the parliament dissolved before the national elections in April - May 2009. A similar bill which sets up a regulatory authority for agricultural land acquisition is pending. The FM Pranab Mukherjee recently said that the government would soon amend the 116 year old land act. The question that remains though is only one - when?

03:42
 
Opinion these days is widely divided as to whether the global economy is recovering or not. However, there is one indicator that is touted as the barometer of the global economy. And this indicator seems to strongly point out that the global economy is on the recovery path. We are talking about the use of shipping containers. This has risen sharply this year. And has surpassed even the record levels of 2008. Once again it is the emerging economies that take the cake. Not surprisingly, the increased volumes have pushed up rates per container shipped. And this has boosted the profitability of shipping lines. However, concerns still abound that the global economy could falter again. If that does happen, shipping companies will certainly be among the first ones to feel the pinch.

04:10
 
At a time when interest rates across the financial sector are moving up, you home loan EMI may continue to remain stable. That is if you have sourced the loans from a housing finance company (HFC) like HDFC and not from a bank. HFCs currently have 30% share of the housing finance market. However more than 50% of their source of funding is from banks. Hence even though the regulator National Housing Bank (NHB) may not want the players in the sector to raise lending rates, a change in base rates may make it inevitable. Banks are expected to revise their base rates upwards to factor in the rate hikes effected by the RBI. The same could only shrink the margins for the HFCs unless they hike your EMIs. Commercial banks currently enjoy a lion's share of mortgage finance in India and it is unlikely that the HFCs will be able to eat into the pie.

04:35
 
After opening in the green, markets have continued to ramp up gains. The BSE-Sensex was trading 135 points higher at the time of writing this. Stocks from the FMCG and banking space witnessed buying interest while PSU and realty stocks saw some declines. Sentiments were positive in the rest of Asia, with all major markets seeing gains.

04:50  Today's investing mantra
"Get inside information from the president and you will probably lose half of your money. If you get it from the chairman of the board, you will lose all of it." - Jim Rogers
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31 Responses to "These 'lawbreakers' demand a 3-fold hike in pay"

Ravi Shankar R

Sep 1, 2010

The highest-paid politician by a staggering margin, Lee Hsien Loong,the Singapore PM, has often defended his extravagant salary of S$ 2.75 mio.The Singapore PM is just paid S$ 2.75 mio.No other allowance.If you add up the invisible earnings of our Cabinet Ministers that should be 10 times what Lee makes....Let us pay good and demand good quality.

The question should be " are our MPS" delivering? Lets get them to deliver.Not what we pay pay them.The question in such apex positions should never be about what compensation but more about whether they can deliver what the country wants of them to deliver.

Like 

Surrender

Aug 23, 2010

Let their greed be satisfied with just one rider that even a single allegation of corruption / misappropriation would debar these politicians from any payment ab initio;

Like 

ramaraom3

Aug 23, 2010

dear sir,
the govt should entrust the work of drafting the land aquisition act to the law commission and also suggest that t he compensation to the farmer should be such that he should look forward to the process of aquisition, rather than agitate against it. while giving effect to market rate in compensation claims they should also be given 5% of land in developed form with all infrastructure ,around the periphery with good access. you may add other incentives like training the eligible locals for jobs in the industry.you must create a stake for the landholder in the wellbeing of the company.

Like 

krishnan

Aug 20, 2010

it will never change as long as the country is populated by people with criminal tendencies(with a few exceptions)they elect corrupt lawmakers,condone corrupt and unjust police machinery and officials .and they are as eager to earning money when the opportunity presents itself.democracy is a farce with voters even demanding money for the votes .
only hope is some savior who can unite like minded and honest people across the country and take action.
that is hoping for a miracle but miracles do happen

Like 

Subramanya Uchangi

Aug 20, 2010

The Times of India's exposure of Kalmady is only one among 540 MPs and TOI deserves congratulations for their efforts to bring out skeletons one by one. The TOI should set a target of exposing "one MLA or one MP" eveery day. The strength of Parliament becomes ZERO at the end of one year. Every MLA or MP or a Minister has his own story of how they have 'loot mardiya'.

Like 

DM

Aug 20, 2010

I agree with Ravinder Gandhi and Sailor. Pay peanuts and you get monkeys - this is what the singapore pm or something had said about the salaries their politicians get....and ofcourse you have singapore to display results for yourself....It;s time that we also looked at our PM who is Mr. CLEAN how can he survive on 16000 a month. Yes sharad pawar, lalu etc etc will probably use this as petrol money....Make them swear on their kids for oath, have super stringent independant authorities under president or something watching over them.... time we made INDIA SOMETHING and it's time we felt proud to be INDIAN

Like 

PM

Aug 20, 2010

The 16000 figure is totally misleading. Add on all the allowances and perks and you have a figure that is several lakhs / month. And that is not counting all the "gifts" that might just come by their way.

Like 

Ravinder Gandhi

Aug 20, 2010

Let the MPs demand 5 time salary hike not why 3 time but let them also take a oath not by not in the name of Constitution, not by the name of Geeta, not by the name of any other of any other religion or religious book but by the name of their beloved family members that will not indulge in corruption and malpractices and bring in all the money that they are holding as blackmarketeers in India or in Swiss Banks.

Like 

Manoj Kumar

Aug 20, 2010

The justice system and many other related systems like policing etc. are going to remain so unless specifically demanded by us as a condition to our voting the legislators to power. Secondly for these issues to be addressed by politicians we need active, aware and vigilant citizenry. As the old saying goes people get the government they deserve.

Like 

Sreenivas

Aug 20, 2010

Ramlinga Raju the thief along with his other rich and powerful and notorious cohorts should be brought to book.A way to cleanse our systems be it political,judicial or executive has to be found and justice should be meted out early.Judiciary once again failed is the case of Mr. Kini - executive director of Unoin bank who was aquitted of all charges after 24 years few days back. Cant we the people make the judiciary and CBI accountable for such vindictive calousness??????????

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