India shining but MPs whining - Straight from the Hip by J Mulraj
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Investing in India - Straight from the Hip by J Mulraj
India shining but MPs whining A  A  A

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21 AUGUST 2010


The India story is shining, as demonstrated by its rising stockmarket, which hit a 30 month high last week. As per CMIE India's GDP is to grow 9.2% in 2011, a mouth watering rate that would be the envy of the developed world which is still struggling to come out of recession. Contribution to GDP and to saving on subsidies arising from the exploitation of KG basin gas would also start to kick in. The increase in incomes leads to its own virtuous cycle of increased consumption, driving further economic growth.

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The spoiler of this story may well be our own leaders. Last week our members of Parliament, who can never, after their antics in Parliament, be considered to be role models for our school children, took petulance to a new height. They disrupted proceedings in the House by shouting them down, outbidding Oliver Twist in asking for more. More for what? For walking out of the House in a significantly large number of sessions? For turning a blind eye to the obvious and rampant corruption in the Commonwealth Games? For turning a blind eye to the abuse of the environment through illegal mining activities? For stalling the introduction of the GST (goods and services tax) that, simply by rationalising and simplifying indirect taxes can spur GDP growth by 1 - 2%? For what do badly behaved MPs feel they want a bigger hike than 200%?

After several early warnings and enough evidence of rampant corruption, the Government of honest Prime Minister Manmohan Singh finally put a ten member team to oversee the administration of the Commonweath Games, barely 6 weeks away. Yet, the person who bought toilet paper rolls at over Rs 4000 each (all he needed to do was look at and get himself a good deal) still goes unpunished. The Government says that the guilty will go punished, but its credulity is shot - there is not much evidence that big scamsters are really punished. They just spend a little time in jail till public memory fades, then manage to slip away, sharing the loot. Witness the grant of bail to Satyam self-admitted scam accused, Ramalinga Raju.

The opposition BJP states have blocked the introduction of the GST for over 2 years now. The GST was, after the KG basin gas, one of the bullish factors for India. Yet the Civil Nuclear Liabilities Bill is likely to be passed soon, after the BJP opposition agreed to it once the liability cap was raised to Rs 1500 crores, three times the original plan. (that is probably less than the amount extricated from the CWG). It is also less than the $470 m. amount settled with Union Carbide for the Bhopal gas tragedy that killed 10,000 people and which, 20 years later, the Government laments was grossly inadequate. Yet the Government now wants to cap a civil nuclear liability from a nuclear accident, one that can kill several times 10,000 people, at a lower level. This is an example of the Peter Principle, which says that people rise in any organisation, to the level of their incompetency.

In corporate news of interest, Vedanta, a metals and minerals player with a London listing, is making a bid to enter into the petroleum sector, offering to buy 40% of Cairn India, plus the mandatory open offer of another 20% to minority shareholders. It wants to buy the 40% from the Scottish parent at Rs 405, and ask its affiliate, Sesa Goa, to buy the 20%, if offered by minority shareholders, for Rs 355. The difference of Rs 50 is for a non compete payment, in other words that the Scottish parent agrees, for this fee, not to compete in India with Vedanta after it has sold the energy assets. SEBI is trying to protect minority shareholders by doing away with such differential pricing, but at the moment it is legal.

Power Grid may be in for a windfall. It has been suggested by consultants that it can lease out 120,000, or 80% of its towers, to telephone companies - these towers are capable of carrying both telephone and electric wires.

The global scene is still worrisome because the recovery is anaemic despite ladels of liquidity put in. A lot of this liquidity has gone into US Treasury bonds, pushing up their price and pushing down their yields to below 1%, which is ridiculously low. According to Jeremy Siegel and Jeremy Schwartz, the next big bubble to burst will be the American Bond bubble. That will hurt investors who have bought these bonds badly; perhaps a few banks can get seriously impaired.

Perhaps that's why savvy investors like George Soros are putting more money into emerging market assets. Soros bought a 4% stake in BSE (Mumbai Stock Exchange) valuing the exchange at $ 800 m.(Rs 3700 crores). Soros seems to have got himself a good deal, if we compare the valuation of Rs 5000 crores which newly formed MCX-SX managed to get. Now MCX-SX has not even commenced trading in equity; it still does transactions in only foreign currency; whilst the BSE is over 130 years old. This makes the valuations even more startling.

The next big divestment will be that of Coal India, in mid October, expected to raise over Rs 13,000 - 15,000 crores. MMTC's follow on offer will, well, follow.

The sensex gained 234 points last week to end at 18401 and the Nifty gained 82 to end at 5530.

The India story keeps looking good except for the sorry state of governance. Leading tennis players have not been paid past dues, and are threatening to boycott the CWG, yet the OC has the money to pay Rs 4000 for a toilet roll! (Several of its deals include a return of the asset after a 15 day use; one hopes the same is not the case for the toilet paper). BJP MPs are protesting rampant corruption in the mid day meal programme, and pointing to the 'unfit for human consumption' food given to school children; yet there is a surplus of foodgrain rotting in open fields for want of storage. There is enough money to hike MPs who walk out half the time from their job, but not enough to keep India in defence preparedness. The only aircraft carrier we have is inadequate and we haven't bought a major gun since the Bofors purchase. This abysmal governance is the key risk factor. Otherwise, as Aamir Khan would sing, aaaaaal is well.

J Mulraj is a stock market columnist and observer of long standing. His weekly column on stock markets has run for over 27 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is Conference Head - India, for Euromoney. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non-fiction, bridge, snooker and chess.

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10 Responses to "India shining but MPs whining"
Om Prakash Sharma
Sep 4, 2010
Dear Sir,
Iam delighted by your views on agricultural tur around in Brazil.It has touched my heart.The act of the Brazil Leaders should open the eyes of Sugar Baron and our very well fed Agriculture Minister and his Financial Wizard Prime Minister Dr. Man Mohan Singh.
Thanks for that peace of news.
Like 
rangan
Aug 28, 2010
govt has earned lot ofmoney through taxes and i also believe govt has recd enormousmoney through tax by an evader who sits in foreign country and because of tax traety with that country ,india cannot open the secret but happy with the tax he ahs been asked topay .the ampunt i believe is huge
next there is no accountabality from the govt side about spending it is aloot raj by politicians,high salry increase for bureacrats,and bureacratic corruption and no state is without scam except for gujarat .even in dtc capital gains has been imposed in addition to stt ,since it is a daily money pouring into govt coffers .since capital market is so highly regulated leaving ll other markets like land unregulated ,revenue model has been built .politicains and bureacrats never think of land market being regulated since babus and politicians are both involved.
today if i want to buy 100 shares a company valued at rs 1000,i have to sign so many documents and prove my credentials where as for buying 100 crores worth of land ,cash can be paidand votersidentity card and ration card is enough mind no pan card reqd.that too land can be under valued to the extent of 80percent .what a tamasha bharat mata jai
Like 
Sachin Wagal
Aug 28, 2010
Related to mining part of your article.
I would have appreciated if you had mentioned that government should avoid illegal mining and protect national assets at all cost and book guilty with server punishment instead of you mentioning that mining rights should be given to Vedanta just to avoid illegal mining.
Please wake up and understand that every person has a right to leave and protect his ancestral land possessed for centuries.
I will like to ask you a question... will are politicians relocate parliament to a hinterland to avoid traffic jams in Delhi or will ministers leave their posh bungalows in Delhi and relocate to hinterland so that these areas can be developed for commercial purposes. If politicians cannot do it then why should poor tribalís, farmers and commoners who are legitimate owners agree to relocation just to see very few getting richer at expense of their cost. This commoners are not the ones like in Mumbai who have illegally grabbed land and built shanties and then got them legalized by blessing of politicians due to vote bank politics. Even these illegal shanty owners do not agree to relocate and are being protected by politicians due to vote bank politics.
Therefore the question why should this legal tribalís owning and preserving land for centuries give it up for individual profiting.
Like 
Shanthirai Prabhu
Aug 23, 2010
Lots of news of corruption, corrupt politicians, corrupt public, etc. Its time for people like Jawahir Mulraj, to dig into the mode of payments, where the loot is stored, how,when,where the money exchanges hands. Are places of worship a safe place to store balck money - at least the Chief Minister's of all hues (Karnataka) would invariably visit holy places on a weekly baises, halicopter hopping if need be, why does this holy man lose interest as soon as he is out of power. Even if the Politicians declare their income, from nil returns to crores in matter of 3 to 4 years,does not the Income tax department ask for the source of income, is this why agricultural income is tax exepted? we need to plug every source, if we have to save this country. We are in the pitts. Like 
G Srikumar
Aug 21, 2010
We are sentimental and emotional about all these issues. But the people at the helm of affairs either at CWG or other major issues, which later reveal some scams are ABSOLUTELY INSENSITIVE. They won't bother as to what it means to them. They survive with all the scams & shames. They volunteer to get in to a party and come to do public service and demanding what they need and get thru coz they pass the bill. Common man can keep saying what he wants with no say in parliament. With this revised salary can their greed come down and they can assure that they won't be corrupt, rather than saying " Law will take its own course after every corruption" caught on camera. Yes very rare, there are a few Politicians who are clean still survive in this system. They deserve the revision. Like 
Nutan Kaushik
Aug 21, 2010
All comments are well taken.. but the price of Rs 3700 odd is for 100 rolls.. not one roll. Like 
R K SHARMA
Aug 21, 2010
Well i am sure i agree with the assessment of the global economy.
What i liked the most is as below:---
1)Last week our members of Parliament, who can never, after their antics in Parliament, be considered to be role models for our school children, took petulance to a new height. They disrupted proceedings in the House by shouting them down, outbidding Oliver Twist in asking for more. More for what? For walking out of the House in a significantly large number of sessions? For turning a blind eye to the obvious and rampant corruption in the Commonwealth Games? For turning a blind eye to the abuse of the environment through illegal mining activities? For stalling the introduction of the GST (goods and services tax) that, simply by rationalising and simplifying indirect taxes can spur GDP growth by 1 - 2%? For what do badly behaved MPs feel they want a bigger hike than 200%?
I only add that this was done by KNOWN CORRUPT PEOPLE AT THE POINT OF THE GUN.
2)"Power Grid may be in for a windfall. It has been suggested by consultants that it can lease out 120,000, or 80% of its towers, to telephone companies - these towers are capable of carrying both telephone and electric wires."A DEVELOPMENT TO WATCH BY THE RETAIL INVESTOR INDEED.THANKS FOR IT.
Like 
M C AGRAWAL
Aug 21, 2010
India has all the ingridients to reach for moon but unfortunately the entire political class except very few have let her down very much. But the time is not very far off when the public outcry will take the form of a revolution where a new class of political leadership will come who will be honest yet efficient and the entire current political class will be cleaned with big broom and dumped in sea then and then only India will be really shining. Till such time it will be an illusion of India shining based on sensex movement.I am hopeful of a honest, strong and efficient political leadership rising on the horizon sooner then later who will give India highest position on the comity of nations which she deserves. Like 
sethu
Aug 21, 2010
Yes..Honest PM but still behaves like a obedient civil servant to his Master..Most of the MPs who are demanding for salary of more than 80000 pm are corrupt and very wealthy ..As rightly pointed out but for poor governance, India would have been top of the world by now!!! Like 
Govind Gadiyar
Aug 21, 2010
Dear All,

Pay our MP's well so that they need not be corrupt. Also, common man will be able to enter the Parliament and live a good life.

Remember even a ordinary Brahmin Priest has family to take care, parents hospitalization bills and Children education to be paid.

Let us pay them more but demand good service. That is important. If need be pay them double but get good work done.

Regards
Like 
  
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