Dec 7, 2001|
Indian Economy: Attitude problem?
While the growth of the agricultural sector is at the mercy of rain gods, services and the industrial sectors are seemingly more manageable, so to say. However, the Industrial sector in the country has shown a disappointing growth for the first half of fiscal FY02. In 1HFY01, the IIP growth was 5.7%, while FY02 this figure is a dismal 2.3%.
Of course, there is the slow down in demand, as always. But the reason for low growth could also be that new investments are not being made. According to RBI, corporate investments to create new fixed assets in FY02, are expected to be lower by 1.3% compared to FY01. The cause for concern is that this is not an anomaly, but a five-year trend. The trend shows that investments by corporates have been declining for the past five years. The expected figure for FY02 is 24% lower compared to FY97. In each of the years since FY97 corporate investments have not shown any growth.
What could be the reasons? One could be high cost of capital. Well, the RBI is doing a good job in moving towards a low interest rate regime. Thanks to them there is significant liquidity in the system. This move has caused credit off take to improve marginally but bulk of the money has found its way to the debt markets and bonds are quoting at all time low yields.
In an interview with Equitymaster, Mr. Mahesh Vyas, ED, CMIE pointed out two very interesting reasons for low credit off take. Firstly, a certain section of entrepreneurs, who have in the past invested extremely inefficiently, have lost their credibility with the banking system.
Read Equitymaster's interview with Mr. Mahesh Vyas.
However, it is the second reason that is more worrying. According to Mr. Vyas, "The other problem is that there are fears of imports coming in a large way and the unpreparedness of the Indian corporate sector to face competition from cheaper imports. And imports are only going to get cheaper. They are going to get even cheaper. Only if you can withstand such global competition, can you survive. The statement that comes across from the Indian corporates is that they are not sure they can compete. So they are not willing to put any more money."
Is the Indian industry therefore, slowing down due to a lack of attitude?
If yes, we have serious problem at hands. Unfortunately, business is all about attitude, taking calculated risks and going the extra mile. Who says we can't beat the global players at their own game. CSC's recent tie up with Satyam, was a clear acquiescence of the fact that no one can provide value for money in the IT services business better than the Indians.
For investors here lies a very big investing 'tip'. Watch out for managements that are not scared but are willing to take global competition head on. Only globally competitive organisations will survive and that means those, which don't want to be protected. They realize that prices will fall in the future and ready to play the game the way it is.
More Views on News
Jul 25, 2017
Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?
May 27, 2017
What happens when minority shareholders are short-changed in the normal course of business?
Feb 15, 2017
PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.
Aug 24, 2016
And here's your chance to claim a free copy of this book...
Aug 12, 2016
And Why India's demographic dividend could turn out to be a doubtful debt...
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407