Can India achieve 9% growth in next five years?

Growth story of India was different when India was growing at 9% last decade but 2008 subprime crisis was a stumbling block in India’s growth and also bad governance, policy paralysis, lack of strong macroeconomic policy brought down India’s growth to 4.7% in 2013-14. So now question arises that can India achieve 9% as it did in last decade, the research team of  Morgan Stanley believes that superlative growth rates achieved by India between 2003 and 2008 which was above 8% was extremely short term growth it was driven by a huge gush of global liquidity and did not pave the way for future high growth rates, the was a giant size growth of emerging markets from 2003 to 2008 India was carried away with the global growth current.

    All emerging markets were doing well and what we are seeing now credit bubble has burst and all emerging markets growth rates were toppled, in a nutshell it was all about liquidity. It was not really economic policies or government played any role in India’s growth story also deteriorating macro-economic fundamentals ,rising fiscal deficits, high inflation rates has resulted in economic slowdown due to policy roadblocks in policy making now answering the question and understand the growth story of India to re-establish at 9% growth rate in next five years driven by the fact that we got pent up demand in the country it is not going to be easy ride as it was when there was euphoria of global growth because of liquidity in the emerging markets, now story is changing now Mr. narendra modi in driving seat but still India will grow at 7% as shown in the IMF chart but to reach to 9% or double digit growth would be highly unlikely he is intended striking balance between farming , small firms and global companies is required apparently Mr. modi having run gujrat successfully now he is facing far harder challenge of running India his advantages are administrative competence, control over his party and a majority in parliament that would actually lead to ease of decision making which was not possible in previous government now the major economical challenges he is facings are stagflation growth from 4 to 5% almost half the level at the peak, rising inflation, declining public finances and current account deficit as we all know a decade India apparently growing at 9% now seems to a heyday, for that rates of saving and investment around almost 30% GDP that would help on financing factories infrastructure projects, lifting India's potential unlike most Asian countries India has brilliant entrepreneur who could wheel and deal the country to prosperity.     

How we can bring growth back to 9% growth? What exactly had gone wrong?

     Saving and investment of the country is taking a hit rates dipped and their mixed had also deteriorated high inflation led household to buy gold, shifting money from banking system where it can be productively employed and mix of corruption excessive leverage, incompetence have led private companies to have major part of GDP infrastructure still a bone of contention. Industries that are close to state involve corruption on a grand scale bribes paid to politicians and government officials past decade of anywhere between $4 billion to $12 billion. On top of it only 3% Indian pay income tax leaving a hole in government finances about 90% of jobs are informal leading to poverty. Agriculture is feudal and food shortage cause inflation. India is suppose to be manufacturing hub or industrializing but manufacturing contributes only 15% of GDP and 11% of jobs and day by days its share has been falling power and electricity generation is still a major problem because of that industry’s growth is stagnant, inadequate supply of infrastructure it is the biggest hindrance to doing business also discontent within the business community remains high about the lack of reforms and perceived ability of government to push them through, tax regulations in India should change the country’s supply of transport, ICT And energy infrastructure remains largely inefficient and ill adapted to the needs of the economy, poor educational standard has become another major problem although India has benefited from high percent English speakers there is still high level of illiteracy Amongst the population, it is worse in rural areas and amongst women. Over 50% of Indian women are illiterate. This limits economic development and a more skilled workforce. Touching upon rigid labour law which discourages firm from expanding it also discourages foreign investment. Trades unions have an important political power base and government often shy away from tackling potentially political sensitive labour issues, high level of private debt amount of lending in India grown by 30% in the past year. However there are concerns about the risk of such a loans. If they are dependent on rising property prices it could be problematic moreover if inflation increases further it may force RBI to increase interest rate. If interest rates rise substantially it will leave those indebted facing rising interest payments and potentially reducing consumer spending in the future with that agriculture sector is inefficient agriculture produces 17.4% economic output but over 51% of workforce employed in agriculture this is the most inefficient sector of economy and reform has proved slow. The inflation rate one of the major problems behind decelerating India’s growth the inflation rate of the economy as a whole has been consistently high over the last 5 years it has been a double digit inflation. Over the past decade there has been sharp wage increases fuelled by expectations of even greater increase in wealth and incomes turning inflation into less potent electoral threat. Having considered all these threats to Indian economy it seems unlikely to grow at 9%these are the hindrance in India’s growth which can not be fixed overnight however it is possible for India to grow at 6.5% to 7% provided that all said is done to fix these economic problems.

           We also can not turn our blind eye to quantitative easing tapering  which US fed will be forced to announce to coming years lets look at it how it will affect Indian economy the easiest way to stimulate economic growth that involves a lot of risk for the economy. In 2011 before the first round of tapering  the 10 years Indian government gave yield of 7.92% and the whole dollar exchange rate was 44.75. however in 2011 when the first round of begun in the US, FII assumed a short in the Indian bond market selling huge volumes the price of G-SEC fell and the yield rose to 8055% because of huge selling the FIIs took  more dollars along with them out of the country, by the beginning of 2013 every one was waiting for US economic data. The GDP had grown by 2.8% and in May 2013 fed made a statement that fed might consider tapering very soon. In FY 13, Indian economy grew by decade low 4.8% and the dollar exchange rate was 54.99 when fed announced tapering might start very soon, in the hope of better yields on US treasury bills there was a chaos in India. FIIs across the world shorted their position in India, In the hope of better return in US in India CAD(Current Account Deficit) in the previous financial year FY13 was 4.8% of GDP consumer price index (CPI) was at 10% and wholesale price index (CPI) was at 6%. On august 28,2013 rupee touched all time low of 69 against one dollar. Indian forex reserve was at $276 billion dollar. The demand for dollar grew from two fronts. One on high import on non essential commodities particularly gems and jewelry and the other demand by oil marketing companies. On the import side government took a prudent decision of increasing the import duty on gems and jewelry from 2 to 10%, thus restricting imports to some level Indian governor had a big task in his hand and had to fight on multiple fronts. One was inflation and other was rupee depreciation front which is nothing but herculean task however things are changing and we could see silver linings on the dark clouds ever since modi government came to power the leader who has an economic vision will change India’s picture if  he delivers and what has been told but without better governance nothing can be achieved. Having said that even 7% growth would mean a lot to India when global economy is slowing down. Fastest growing country in the world china came down to 7.1% India will have an edge over the other emerging economies.

       India even has a capacity to grow by 8%. If we had followed best practices and displayed the highest standard of good governance, the economy however showed signs of rival as GDP clocked 5.7% growth in April-June period of current fiscal, highest in the past 10 quarters a recent world bank report projects India’s economy to expand by 5.6%this fiscal as reforms gain momentum and the growth is expected to accelerate as proposed measures such as goods and services tax provide a boost to manufacturing sector the small measures taken so far have at least focused on some big problems one cause of slowdown was a sudden drop in investment, as big projects, such as power plants and roads got snarled up in bureaucracy but modi government has cracked heads. Tales of civil servants working late have become commonplace many permits now can be obtained online. By the start of September government has approved 175 stalled projects. Meanwhile small changes at the central level have helped curb blight inflation as it rose, and as we have stable government new stability should help growth to pick up, from 5.5 to 6.5% as well, the recovery would be quicker and even happily many weal balance-sheet have taken advantage of the rising stock market to raise equity. If reserve bank of India to ease rates towards the end of this year, if inflation eases further would help India to grow at higher rate, India is one of the most diversified emerging markets which provides foreign investor enough opportunities to rotate investment within the country. The solution to India’s fiscal problem is to expand the tax net, A proposed direct-tax code and GST should achieve. With more revenue, the state can build more infrastructure, the experiment over the past getting private sector to do heavy lifting had mixed results. The GST also helps India a single market by replacing myriad local levies. The bureaucracy need to be reformed, it will require nothing less than a complete change in outlook for a country that has forgotten how to do business. Its easier said than done but even if we try to reach nearby to bring in the reform even 8 and also far reaching 9% growth can be achieved. But unless the government does its part by adopting more radical reforms, the 9% annual growth that India enjoyed before the financial crisis would be a distant dream.

                                              

Another Indian falling star at wall street

This week probably be the sad week for India inc or for every Indian. They say some time good guys do the bad things does it apply for the man with such a remarkable career and who is inspiration for millions of people around the world,Rajat Gupta is the man who defined India's influence in the global corporate world sentenced to two years in prison for insider trading. This is another example to white collar crime is growing in corporate world,what must have made man with such intelligence and such a career to commit a crime like this is that just to help a friend? or money? or to make profit for his own firm? of-course money was not the inspiration for rajat gupta who was already wealthy so what made him commit a crime like this and to make his career to disgrace. The questions going through every Indians mind is what about the Indian image at wall street i think this question is yet to be answered or time is the best answer for it. prosecutors still say that it is a lenient verdict for rajat gupta who brazenly revealed confidential company information to his friend Raj Ratanam, who is already serving a 11 year prison term for insider trading. 

              The judge Jed Rakoff said he is on par with Mother Teresa because with his  benevolent work he touched  upon the millions of people on the planet apparently that makes me uneasy why person like him walks out of the goldman sachs meeting and calls his friend to give the confidential information. however there is lesson to be learnt from american judicial system for corporate India and indian law system that the trail of Rajat Gupta was fast and right though some people call it as 'lenient verdict" because they atcually thought that Rajat Gupta would be sentenced to ten year because they believe in phrase" justice delayed is justice denied" but in India it does not make any sense white collar crimes like satyam's Ramlinga Raju still enjoying the inability of Indian judicial system which could not even began the trial in six year let alone the verdict indeed there is lesson to be learnt from it. As we can see all the biggies like Bill gates, Kofie Annan came for his support but the damage was already done.

          He hailed his image as Indian poster-boy scaling great heights in corporate echelons abroad, he himself said i have lost my reputation that i have built over a lifetime. I guess this greedy world needed this kind of example stating that nobody is above the law and you can not get away with it regardless of who you are,after stellar career that was 40 years in the making,it took one year for Gupta's downfall,for upcoimg leaders and young Indian leaders it would nice to understand and learn from, it is difficult to fathom that this is an indelible  impression of Indian on the globe but i hope there would be a time that another poster boy of India would make less nostalgic about this event and would make us proud.

    

How about learning something from the legend!

Warren Buffett is without question the most successful investor of our time (and possibly of all time).  His savvy deal making abilities coupled with his creative and cheerful personality allowed him to achieve success like no other.

While searching the web for the comments he’s made through the years, I found many insightful comments that truly show off Mr. Buffett’s knowledge so I want to share 52 of these with you below!  Let me know what you think!

1. A public-opinion poll is no substitute for thought.
2. Chains of habit are too light to be felt until they are too heavy to be broken.
3. I always knew I was going to be rich. I don’t think I ever doubted it for a minute.
4. I am quite serious when I say that I do not believe there are, on the whole earth besides, so many intensified bores as in these United States. No man can form an adequate idea of the real meaning of the word, without coming here.
5. I buy expensive suits. They just look cheap on me.                                                                                    I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks. There’s nothing material I want very much. And I’m going to give virtually all of those claim checks to charity when my wife and I die.
6. I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
7. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
8. If a business does well, the stock eventually follows.
9. If past history was all there was to the game, the richest people would be librarians.
10. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.
11. In the business world, the rear view mirror is always clearer than the windshield.
12. Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
13. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
14. It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.
15. It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
16. I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term ‘thinking outside the box.’
17. Let blockheads read what blockheads wrote.
18. Look at market fluctuations as your friend rather than your enemy; profitfrom folly rather than participate in it.
19. Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases
20. Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
21. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
22. Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
23. Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
24. Only when the tide goes out do you discover who’s been swimming naked.
25. Our favorite holding period is forever.
26. Price is what you pay. Value is what you get.
27. Risk comes from not knowing what you’re doing.
28. Risk is a part of God’s game, alike for men and nations.
29. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
30. Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.
31. The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
32. The investor of today does not profit from yesterday’s growth.
33. The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.
34. The only time to buy these is on a day with no “y” in it.
35. The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.
36. There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do.
37. There seems to be some perverse human characteristic that likes to make easy things difficult.
38. Time is the friend of the wonderful company, the enemy of the mediocre.
39. Value is what you get.
40. We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’
41. We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.
42. We enjoy the process far more than the proceeds.
43. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
44. We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.
45. When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
46. Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
47. Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.
48. Wide diversification is only required when investors do not understand what they are doing.
49. You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.
50. You only have to do a very few things right in your life so long as you don’t do too many things wrong.
51. Your premium brand had better be delivering something special, or it’s not going to get the business