Tuesday, 29 November 2011

Is FDI in Retail the "fix-all" for the Indain economy

The cabinet approved 51% FDI in multi-brand retail in the last week. The rumour mongers and spin doctors of the government have started talking as if they have taken a giant step in the direction of development of Indian Economy.

Lets take a look at what are the fall outs of 51% FDI in multi brand retail. If the larger retailers really warm up to this idea and invest in or country, who will bring in the remaining 49% is the moot question? will it be through equity dilution to the Indian Public? or will the corporate chieftains, known for their hoarding propensity grab up the remaining 49% stake? if the public is allowed/invited to participate through the equity route, it will be a welcome step in making public participation more inclusive, else it will be another of those schemes meant for the rich to be richer and poor to be poorer (this is assuming that the larger retailers will adhere to good corporate responsibility and keep their shareholders interests in mind whence they manage their businesses).

Another major lobby which will benefit from this immensely will be the real estate lobby. People holding (hoarding) large patches of prime real estate will be able to strike highly profitable deals at unrealistic prices and will be able to make more money. The high rents paid for these commercial properties will end up burning a hole in the pockets of the final consumer. No only this, but another interesting thing is panning out in the Indian markets due to these unrealistic property prices and rental rates. Visit any city, you will find hordes of empty commercial spaces in the upper floors of posh building without any tenants. The owners think that they will be able to attract the same rent as building space with frontage and have kept them empty. The rentals of commercial spaces work out to a little over 4% per annum on the investments made. investors in real estate/ commercial properties are still doing it because they think that the loss in rentals will be made up by the capital appreciation. (doesn't this smack of the stock market mentality? unattractive dividends being made up for by the capital appreciation of stocks!)

The question is, is this approach to real estate pricing  correct in the first place? Is real estate the same as stocks? stocks are liquid: real estate takes a long time to liquidate, stocks can be easily transferred: real estate takes an eternity, litigation in stocks is very minuscule: real estate is highly litigative in nature. So many differences can be drawn to elucidate that real estate and stocks are different classes of assets and they have to be valued and treated differently.

The trading community, which relies on the difference between the farmers/producers price and the retail price will be the worst hit in this milieu. The commission agent will lose his relevance once large retails come over. Remember Reliance had started a vendor portal to procure all their SKU's directly from the producers. Disintermediation is a good thing for markets. But, intermediation employs a majority of people in India (with a long history of trading, and a country of traders) the question arises that whether it is prudent to kill the business that Indians are so good at?

I have posed these questions to elicit comments and make this a lively discussion/debate. Please feel free to vent your views on the subject.

Now, for the outlook on the markets: The cheer in the stock market will be short lived as with other bailout measures. the NIFTY is in a secular bearish trend and it will take a big effort to turn the tide.

Saturday, 27 August 2011

ANNA forces a compromise

The entire episode of Anna and his struggle to bring about the issue of corruption center stage has brought about some key take-aways.

1. The youth and the middle class population of India have become politically aware and they should shed their cynicism and VOTE in the next election.

2. We should not be carried away by tokenism of the politicians: like spending a night at a villager's house (after installing generator, western toilet and filling his house with mineral water)

3. We should stop electing people who are known land grabbers and are in cahoots with builders, contractors and other people who deal with businessmen who sell their wares mostly without receipts and thus steal on sales tax, income tax and other taxes.

most black money results from evasion of taxes. if taxes are paid truthfully and correctly then the question of generating black money does not arise at all.

4. We should stop talking about CASTE in this country.





That's all for today

I know this post is going to elicit a lot of comments. all comments are welcome.

Friday, 10 June 2011

How to support the fight against Corruption

Let us all pledge to do our bit to free India from the clutches of Corruption and Black Money by taking these simple but very DIFFICULT STEPS

1. Ask for a bill on every purchase and pay the Sales Tax.
2. Give Receipts on every sale and pay the VAT/Sales Tax
3. Declare the correct amount on every sale or purchase of Land and Flat and Pay the registration tax that is applicable.
4. Never demand or pay a cash amount while buying or selling property.
5. Stop bribing the traffic police for traffic violations and pay up the legitimate fines.
6. Register for only one ration card, gas connection and electrical connection.
7. Pay electrical bills on time even for connections of farms.
8. Declare genuine farm income only and not club other incomes as Agricultural income to avoid taxation.
9. Do not pay or receive donations without receipts.
10. Stop acting as though the law is meant for the minions and not for us.
11. Stop running households on expense accounts of businesses. Declare real income from businesses.
12. Stop Bribing people asking for enhanced credit limits/ Loans etc in Banks and financial Institutions
13. Stop asking for kickbacks on commissions on LIC policies, General Insurance Policies, etc.
14. Stop buying Degrees and Diplomas online and apply for jobs with them.
15. Stop asking teachers to give more marks by bribing and coercing them.
16. Start giving receipts for services (especially Doctors): Consultation, Operations, procedures, etc. Other Consultants like Accountants, Tax Consultants, etc.

All these and much more....

Only if we start cleaning up our house and souls then we will be able to clean up the country. Our country is seeped in corruption not because of the politicians and bureaucrats but because, we tolerate corruption, we always believe the laws are for others and not for us. we always want to wipe out corruption but want to get farther by bribing somebody on the way.


Hoping for a corruption free India!

Tuesday, 18 January 2011

wither markets

Let's look at what's the problem with the markets. Nifty went to about 5650 and bounced back today. I think this is just a small bounce. Nifty is headed towards 5500 before it decides which way to go.

In fact, I heard a nice joke the other day. Somebody said that Nifty has made a Ghazini pattern. It forgets where it is going after every fifteen minutes.

There is a lot of bad news for the Nifty to do anything good. Inflation is still very high and we have negative real interest rates in Indian markets. Most of our friends (and experts) expected the dollar to be at Rs.42 by the year 2010 and they even went on TV to boast about it (in fact one very learned "Professor" grilled me hard about this issue when i said that the dollar would reach Rs.48 and of course made fun of me) I only pray to the good lord and ask HIM to forgive the Professor for he knows not what he did:)

With negative interest rates, the FIIs will slowly start realizing that they are not making money anymore and losing due to the depreciating Rupee. I am categorically saying it again that the Rupee is expected to depreciate up to Rs.50 per dollar and you can expect FIIs to take a walk from the Indian markets for a short time.

The reasons for the fall in the markets will be the usual suspects (from the media viewpoint) lukewarm budget, inflation, scams and any other new "NEWS" they can find. but the writing on the wall is very clear. NIFTY at 4900.