Loan Waiver for the Rich
In this issue:
» India's GDP will grow by 7.1% in FY09
» China's population heads back to villages
» Jim Rogers bullish on China
» Office rentals are on their way down
» ...and more!!
00:00 |
--------- Equitymaster WebSummit ---------
An Interaction With Ramesh Damani
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The package for waiver of loans up to Rs 20,000 is meant for farmers who own more than 5 acres of land and have paid their loan dues regularly. And therein lies the irony. While the Centre's farm loan waiver package was meant for those farmers who were poor and had difficulty in paying their dues, the state's package is for the relatively 'rich' farmers!
That is just the tip of the iceberg. This loan waiver package takes the number of farmers in Maharashtra who had benefited from either the state or central government package to 7.8 m and the total loan amount waived to around Rs 140 bn. While the intent of package is virtuous given that only 40% of farmers from the Vidarbha region benefited from the Centre's scheme due to their larger land holdings, the lack of resources to fund the same is a serious worry.
It may be noted that Maharashtra state's finances are already under strain due to the decision to accept the Sixth Pay Commission recommendations for which the government had to make a provision of around Rs 100 bn. So the question that we are asking is, "Where is the money?"
00:45 |
01:01 |
With joblessness expected to swell further owing to the decline in overseas demand for all things Chinese, this reverse migration is expected to further put strain on a huge population of the country's poor. Call it the redrawing China's economic map?
01:34 |
Rather than tendering an apology for corporate governance malpractices, he boasted of the numerous awards that Satyam has won for good corporate governance practices in the past. While two-third of his team of independent directors has resigned, Mr. Raju still talked about the unanimous decision that the board gave to the proposed deals.
Satyam's saga teaches us a very important lesson in stock investing - need to give high importance to management and its practices. Hope events like these do not fade away from our memories so that we survive to tell the tale.
02:05 |
As per Bloomberg, China's power production slumped 9.6% in November, the second consecutive month of decline. Also the country may face a surplus of power within the next two years as demand falls and more capacity as per the earlier plans comes online. With this turn of events, China's need for new power generation capacity addition is expected to dip sharply. This is leading China's State Nuclear Power Technology Corp. to aggressively scout for orders outside its own country; in places like India, South Korea, Brazil, Myanmar and Mozambique. The company has recently won contracts to design coal- fired power plants in India and will design two generators of 1,980 MW (mega-watts) each in India. The Indian power generation equipment companies can expect some serious competition.
02:34 |
As reported by Bloomberg, Rogers is buying Chinese shares that are traded in Hong Kong and Singapore as they appear cheaper than Yuan denominated stocks in Shanghai. In other words, apart from gains in market cap, Rogers is also eyeing the arbitrage opportunity. Although fully aware that China is indeed slowing down, he believes that some parts of the Chinese economy will not be affected at all by what is happening elsewhere. He is particularly interested in Chinese agricultural and infrastructure companies.
02:53 |
Not everyone is complaining though. For firms, who used to be routinely priced out of the market by financial firms like hedge funds, this is indeed a very good time to lock in long-term rentals at lower prices. Situation at Nariman Point, India's very own Manhattan is no different. As per reports, rentals in 'Grade A' buildings are down by as much as 25% and vacancies have also shot up. Law of averages at work!
03:22 |
In fact as per CNN, the 20-city S&P Case-Shiller Index which tracks real estate prices dropped for a staggering 27 months in a row. In October 2008, 14 of the 20 cities set fresh price decline records and nearly 85,000 people lost their homes to foreclosure, adding vacant inventory to an already overburdened market. What seems to have also caused crowding out of sellers in the market is the fact that buyers still have to make 20% down-payment to purchase properties on mortgage. Given the tight liquidity situation, this seems to have become a huge deterrent. The Obama led government is expected to offer lucrative tax incentives and foreclosure prevention plans in its stimulus package to be announced in a couple of months.
04:14 |
Now, P&G's chief operating officer, Robert McDonald says India is critical for the company in the next 5 years. He believes there is a lot of scope for the company to push for growth. After all, the average Indian spends less than US$ 1 per year on P&G products, as compared to the average Chinese who spends US$ 3.
As per a leading business daily, Mr. McDonald is meeting customers and outlets in India, in line with the company's philosophy of getting close to the customer. He sees several opportunities in this tough environment: efficient resource allocation, advertising, acquisitions and expanding product categories. Clearly, India is high on the radar for the US$ 84 bn colossus.
04:42 |
04:53 | Today's investing mantra |
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