Be a super-power or stay a dil-waala? - The Honest Truth By Ajit Dayal
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Investing in India - Honest Truth by Ajit Dayal
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4 OCTOBER 2010


What does it take to be a super power?
It depends, of course, on what you consider to be the definition of a super power.

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If the ability to build nuclear weapons is a criterion for "super-powership", then the US and Russia - with an estimated 10,000 nuclear weapons - are way ahead of the game. For all its forex reserves and Made in China products, China has less than 5% of the nuclear weapons of the US.

Country Suspected Strategic Nuclear Weapons Suspected Non-Strategic Nuclear Weapons Suspected Total Nuclear Weapons
China 20 390 410
France 384 80 464
India 0 60+? 60+?
Israel 0 200+? 200+?
Pakistan 15-25? 0 15-25?
Russia ~ 6,000 ~ 4,000 ~10,000
United Kingdom 185 0 185
United States 7,200 ~ 3,300 ~10,500

Source: www.CDI.org

But, yes, based on holdings of US Dollars in its vaults, China has USD 847 billion (as of July, 2010) while Japan holds USD 821 billion and UK comes a distant third with USD 374 billion. Having said that, we are not sure if these statistics tell us who the super-power really is. Is it these countries for owning so much US Dollars, or is it the USA for fooling these countries into owning what could be worthless pieces of paper? Time will tell.

If "super-powership" is ranked based on the number of people in an army (including reserves), then the list would suggest that North Korea with 9.5 million people in its army is the real super power, just a shade ahead of its neighbour South Korea (8.7 million).

Country Size of army, para-military, and reserves
China 3.4 million
India 4.8 million
Brazil 2.1 million
South Korea 8.7 million
North Korea 9.5 million
Russia 21.4 million
USA 2.4 million
Source: wikipedia.org

The Business Standard quotes a US report as ranking India as the third most powerful country in the world after USA and China. If the European Union was to be counted as one bloc, it would take over the third spot and India would be ranked as the 4th most powerful country in the world.
We are not sure what that US report measures as the criteria for its list, but it feels nice to see India in some such list.

Some rich, many poor
India also makes it to the rich lists that tend to be published. After all, we are living in a material world and all that money made because of the legendary friendships between our business houses and politicians has to show up somewhere. Forbes, which is famous for its ranking of people for their wealth - irrespective of how they earned it - has India ranked 5th as home to 49 billionaires when measured in US Dollars, ahead of its once colonial master, the UK with 29 billionaires. And possibly 20 of those 29 must be immigrants from South Asia!

Rank Country Number of billionaires
1  United States 403
2  China 64
3  Russia 62
4  Germany 53
5  India 49
6  United Kingdom 29
7  Turkey 28
8  Hong Kong SAR, China 25
9  Canada 24
10  Japan 22
Source: www.Wikipedia.org, Forbes

And, the least publicised but probably intuitively known list of them all is the one that ranks countries based on their share of global poverty. India has a dominating lead in this list (41% of the world’s poor are in India) with China in a distant, but convincing, second place (22% of the world's poor are in China).

Rank  Countries  Amount 
# 1 India 41.01 % of world's poor 
# 2 China 22.12 % of world's poor 
# 3 Nigeria 8.03 % of world's poor 
# 4 Pakistan 3.86 % of world's poor 
# 5 Bangladesh 3.49 % of world's poor 
= 6 Brazil 1.82 % of world's poor 
= 6 Ethiopia 1.82 % of world's poor 
# 8 Indonesia 1.49 % of world's poor 
# 9 Mexico 1.43 % of world's poor 
# 10 Russia 0.99 % of world's poor
Source : www.nationmaster.com


Hey, my stadium will last longer than yours
Sometimes nations like the glitz and the PR to show that they have arrived - or arriving - on the path to wealth.

------------------------------------ 'The Honest Truth' now in Hindi also ------------------------------------
आपके पसंदीदा लेख अब आपकी भाषा में भी.
यहाँ पढ़िए.
क्या इस हिंदी अनुवाद में वही बात थी जो अजीत के मूल अंग्रेजी लेख में होती है?
इस हिंदी अनुवाद पर अपनी प्रतिक्रियाएं हमें ज़रूर बताएं.

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So they bid to host The Olympics or The World Cup (for football).
Or, in the case of India, for the Commonwealth Games.

Most of the grandiose games end up saddling their local hosts with debt - or, worse still - debt and a decaying structure that is padlocked and chained so that the locals cannot use it once the Games are over.
In South Africa, they built or re-furbished 10 football stadiums for the 2010 World Cup for a cost of USD 2 billion. While some of the stadiums are being used for cricket matches now, the cost of maintaining such stadiums - some in poor towns - is expected to be a drain on the exchequer. Apparently, no one has worked out what it would cost to maintain these stadiums.

An acquaintance from Brazil mourned that his country was in for a double-hit: the 2014 FIFA World Cup and the 2016 Olympic Games. He expects corruption, a waste of public money, and eventual decay.

There are other countries, though, that don't really want to win any ranking game but do. Take the case of Switzerland. It is typically ranked as one of the best places to live and it is also ranked high on competitiveness. While there are many great Swiss companies (ABB, Nestle) the foundation of the Swiss economy for over fifty years has been its willingness - for a fee, of course - to hide money stashed away by dictators, politicians, and businessmen from every part of the world, including India according to media reports! With a zero cost of funds and job creation to look after the visitors who come to check their loot, the Swiss have had a great foundation to build on.

Super-powers in business
This race for "super-powership" can really get silly.
Sometimes it can extend to families and businesses.
Or, now that the bull market has finally caught the attention of the investing public, the investment bankers are adding their silliness to it.

Reportedly six investment banks are willing to help Coal India raise Rs 13,000 crore via an IPO for a fee of Rs 12,500. That is correct: Indian Rupees Twelve Thousand and Five Hundred Only.
I have a proposition for them: I will pay them ten times more from my pocket (Rs 125,000) if they help Quantum Long Term Equity Fund raise one-tenth of what they plan to raise Coal India: Rs 1,300 crore! (See, I am willing to pay distributors 100x more than the competition.J)

Or take the case of the fund managers of the pension system who won their mandates because they quoted management fees of 0.0001%. Since those same fund management houses also manage mutual funds, should they not charge those same low fees to investors in those mutual funds? Aha, how silly of me, they probably do charge 0.0001% as the management fee and they pass on the rest (2.2499%) to the distribution channels!

So while rankings and lists are fun, don't get bowled over by them.
Like John Lennon sang, "A pretty face may last a year or two, but pretty soon we'll see what you can do".

Maybe India should not spend its time building stadiums and foot bridges that may not stand the test of time (sometimes a week) and instead focus on the joy of being while humming away: Hum kaaley hain to kya, dil wale hain!
And that, too, at a set against the backdrop of a snow-capped Switzerland.


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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site. To write to Ajit, please click here.


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16 Responses to "Be a super-power or stay a dil-waala?"

Sanjeev Chandra

Nov 27, 2010

Mr Dayal,

On 8th October 2009, you had written an article titled "Are real estate prices supported by your branch manager?"

We would like to hear from you, your take on how to relate that article with the current graft charges that have been levied against some banks with regard to sanction of loans to developers?

regards

Like 

padmanabhan.s.

Nov 12, 2010

Its a very contradicting article, we have some of the richest people in the world and also the maximum number of poor, this is lopsided development and if history is to be believed its the foundation for simmering revolution ... we already have naxal problems in so many states. Very well said at the end , we should strive to live as beings rather than animals and strive to live happily and I am sure wealth will naturally be distributed to all.

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NAYAK MAFATLAL GORDHANDAS

Nov 11, 2010

Sir, really, I thought the topic "Be a super-power or stay a dil-waala?" I don't decide but I certainly say I want to become super-power and stay as dill-waalla also.


Like 

Bidya S Shaw

Oct 10, 2010

It is a great work for hindi understanding people.Many-many thanks for it. Translation is perfect.Request to provide the article in hindi,this will very much informative and clear understanding in depth of articles.

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NS Chauhan

Oct 8, 2010

It is very wonderful and easy to understand. We should work in Hindi as Hindi is our mother tongue. Post independence, We should have been adopted Hindi all over India but it could not due to some cheater and gaddar leaders (Netaas) of our Country. I wish to mention here that countries those work and education in their own language called today Superpower like China(got independence in 1949), Japan, Brazil and etc. But we are too late. However, your efforts are like Superpower.

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sethu

Oct 7, 2010

HI,
i am not able to understand what you are driving at.Are you saying we are the poorest nation? wide disparity betwen haves and havenots?severely corrupt?wasting our resources?becoming a suerpower is a misnomer?

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Ajay

Oct 7, 2010

Amazing to see you writing in Hindi. But this time I disagree with you on some points. military power many people has already pointed out and about organizing sports, they are very much required. Healthy body houses healthy mind. And it reminds me of a small story that what gives you satisfaction/happiness, you work for that only. Everyone don't get happiness by accumulating wealth like Bill Gates or Mukesh Ambani, they are quite satisfied earning much lesser amount, but spending quality time with their families. So terming such sports event unnecessary would be wrong.

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Manu Lauria

Oct 5, 2010

The key competitive advantage of nations is their standing with respect to the following - wealth (measured in GDP and foreign exchange reserves), wealth (measured in purchasing power based per capita income), size of military (number of personnel), the power of the military (ability to strike from afar - from the air, sea or space, with nukes or with conventional weapons), the health of its people (infant mortality, maternal mortality, incidence of diseases, life expectancy), the power of its social fabric (strength of institutions, freedom of the press, incidence of internecine disturbances, incidence and desire of the public to organize around local and national issues, transparency of dealings), the power of its educational institutions (global rankings, number of world-class PhDs, publications in peer-reviewed journals), investments in R&D (based on outcomes - papers again, patents, Nobel Prizes in the sciences, Field Medals), relationships with immediate neighbours, relationships with other world powers.

These are 10 different, and multidimensional, spheres of influence. More could be added.

Where do we stand in each? We have made huge strides in all of these domains in the last 63 years, but are far away from being in the top 10 or top 50 on many of them. Unfortunately, in some, we are in the bottom 25 percentile.

On some, we may have reached the top 3-5, and that is wonderful. But there are miles and miles to go.

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k m cherian

Oct 5, 2010

Ajit

This is a request and not a comment, please have an english translation next to your hindi phrases in honest truth so that non hindi speaking readers understand the meaning of the hindi phrase

Cherian

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chanakya

Oct 4, 2010

Ajit,
Good point.
With a fraction of the money spent on the games,India can surely become one of the top 3 medal winners in the world,enahncing nation"s prestige.Consider following..
1.It will cost a mere Rs 5 lacs per anum(Board,lodge,training,coach and a stipend included)to train 1 promising boy/girl.Take promising 5000 children of 11 years age and train them rigorously at specialised facilities for say Athletics,swimming,boxing,shooting etc.It will cost Rs 250 crores per year or rs 1500 crores over 6 years.
At least 5% of the trainees are bound to bring India medals.There is no shortage of determined,tough,talented youth with good physique from Punjab,Haryana,Rajasthan,Maharastra,UP,Tamilnadu, North east and other parts of the coutry.And give them the assurance of an officer's job in a PSU of their choice,if they bring home the medal.most of the russian and other old communist bloc countries developed talent by giving their PSUs mentoring roles.
2.What we need is a plainspeaking,honest politician like mani shankar iyer rather than old bureaucrats like MS Gill,for whom it is a plum post retirement posting,thanks to their past loyalties.

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