Friday, January 08, 2010

Non Congress governed states prone to less scams and bubbles

Looking at the ease at which Yedurappa made the announcement about $27 Billion dollars of investment makes me wonder if BJP is more business friendly then the pro-liberalization Congress party. Gujarat and Karnataka both BJP governed states have been attracting business investment by the likes of Tata and Mittals. Even Tamil Nadu under DMK has a good track record for being business friendly. Compare this to Maharashtra and AP under Congress and those two states have been under turmoil for years with scam after scam being reported involving the government officials and politicians. If one has to bet on jobs I would say Chennai and Bangalore would lead the job-growth in India for the next few years.
Here is IBNlive's article on the investment
Cement to steel, K'taka clears $27.5-bn projects

New Delhi: Karnataka has cleared 38 big-ticket projects worth Rs 138,000 crore ($27.5 billion), and hopes soon to finalise the mega investment proposals from global steel makers ArcelorMittal and South Korea's Posco.
Speaking to reporters after a meeting with the chairman of Arcelor Mittal, L N Mittal, Karnataka Chief Minister B S Yeddyurappa said these projects collectively have the potential to generate employment for 92,000 people in the state.
"Nearly 60 percent of these investments would be in north Karnataka," said Yeddyurappa, explaining that the primary focus of his government was to ensure development in the most backward regions of the state.


Anonymous said...

Good for Karnataka and India. I hope there is no double dip recession. If US goes down in recession this time, India will go down with high fever for years and years of slump.

Anonymous said...

Currently Dalal Street and major businesses control the Govt. Either it is Congree or BJP, there will be no difference as these players are so powerful, ruling party has to bow in front of their demands as these are the businesses that pay major contributions to the election fund.

shailesh said...

Focus on fiscal not monetary issues

The government must get its priorities right in exiting from the financial stimulus of 2008-09. Exit is important but not urgent. The world might suffer a double-dip recession in 2010, so exit must not be too fast. Although inflation in India is very high, it is concentrated in food items after a major drought, and this situation cannot be rectified by tight money.

Monetary policy merits much lower priority in exit policy. Bank credit to the commercial sector has been decelerating for months, and surplus liquidity is sloshing around in the financial system. This is the very opposite of overheating. The RBI can raise the cash reserve ratio, mopping up surplus liquidity.

But it should not raise interest rates at this stage, when a double-dip recession is still a possibility. If, instead, the world economy strengthens, and non-food inflation accelerates in the next six months, that will be the right time to hike interest rates.

It amazes me that all these so called pundit, don't see RE bubble and see its impact on inflation. So does one not buy a house to live in? If house prices triples in 5 years, that is not inflation? Give me a break !!!

shailesh said...

Is economy overstimulated?

More than a year ago, the government cut excise by six per cent, from 14 to eight. It also cut service tax by two percent. As a result, the government lost tax revenue of more than Rs 50,000 crore. That’s about one percent of Gross Domestic Product (GDP). That medicine worked. Industrial growth is strong, and has regained momentum. The auto sector was the biggest beneficiary. Car and scooter sales are zooming up.

The stimulus package of the Indian government was miniscule by international comparison. China, US, UK, Japan and others have injected more fiscal support, amounting to as much as 12 percent of GDP. Despite this, their economies have still not fully recovered, with unemployment at record levels. With such large injections, there is no talk of too much stimulus in those economies. Rather, there is an appeal for even more fiscal support to prevent a double dip recession (that is a nascent recovery slipping back). So, how can it be that India’s much smaller fiscal injection be warned about too much?

The real injury is not to taxpayers or industry (who rejoice when there are tax cuts), but to tomorrow’s unborn citizens of India. The Finance Secretary’s worry is about the long-term impact of a larger fiscal deficit (which is where the overstimulation comes from, not from a surplus as in case of China or US). Persistent high deficits will cripple all future growth.

shailesh said...

Food prices mock India's scorching growth

MUMBAI - A surge in food prices at rates unseen for the past 11 years is sending Prime Minister Manmohan Singh's government scurrying for cover as the decade-ending festive season becomes a grim belt-tightener for millions of Indian families.

shailesh said...

Food prices mock India's scorching growth

Street-food prices in Mumbai have gone up over 30%. A regular lunch favorite such as the "rice plate" or thali, for instance, in roadside eateries now costs 40 rupees from the earlier 30 rupees for a plate of four chapatis (thin leavened bread), a handful of rice, watery lentils, a small helping of a vegetable dish and a dash of pickles. The less fortunate and less finicky could survive on tea (5 rupees a cup) and bananas that sell for 2 rupees each.

Premier Manmohan, a professional economist, and his cabinet colleagues are yet to display any out-of-the-box thinking to solve the food price crisis. Finance Minister Pranab Mukherjee said on December 18 that the government was looking to increase imports, though India is the world's fourth-largest producer of vegetables and fruit.

Eat more wheat and less rice, urged a more desperate West Bengal state government in the eastern region, where rice is the staple diet. West Bengal, the largest rice-growing state in India, faces a rice shortfall of 565,000 tonnes this year.

A worried Reserve Bank of India is considering increasing lending rates to curb inflation, while a parliamentary standing committee on finance asked the government to develop a price index exclusively for essential food items such as rice, wheat, pulses, vegetables, sugar and edible oils. Food items in the Wholesale Price Index contributed to a 135.6% increase this year over 2008

Anonymous said...

Do not count on RBI to raise rates as the Finance Ministry would not let it happen easily unless there is massive inflation. They will keep blaming inflation to poor monsoon etc.

No one in ruling party wants hike in rates. It will be a killer to their perceived growth in short term. All they care about is short term growth for re-election.

So, this thing can go on and on for years. There is massive collusion between builders, bankers and politicians. It is not only in India like that but all world countries. US Govt. is being run by Wall Street.

Don't be too optimistic that monetary policy would be fixed. Even the fiscal policy needs work as the deficit will keep increasing. The whole idea of the rich is to crush the middle class and poor class so that they can maintain their stolen riches.

Anonymous said...

hey shailesh..

Is chapathi a leavened or unleavened bread????

I doubt chapathi being leavened...

check again..

Anonymous said...

The people in power know it very well and how this will end. Infinite power and wealth for them, and poverty and 3rd world living standards for us. That was the goal all along; kill the middle class to achieve that sadist’s dream of a nation of 99% utterly poor and 1% absurdly rich.

Anonymous said...

Last year US paid 451Billion USD in just interest for its debt.

What about India? India is also drowning a lot in debt to make payments for the salary increase of Govt. employees and the 100B stimulus for the builders/bankers.

Anonymous said...

HONG KONG — China’s central bank raised a key interest rate slightly Thursday for the first time in nearly five months, in what economists interpreted as the beginning of a broader move to tighten monetary policy and forestall inflation.

Anonymous said...

India needs this kind of law:

Millionaire Hit With $290,000 Swiss Speeding Ticket.
January 07, 2010

ST. GALLEN, Switzerland — A Swiss court has slapped a wealthy speeder with a chalet-sized fine — a full $290,000.

Judges at the cantonal court in St. Gallen, in eastern Switzerland, based the record-breaking fine on the speeder’s estimated wealth of over $20 million.

A statement on the court’s Web site says the driver — a repeat offender — drove up to 35 miles an hour faster than the 50-mile-an-hour limit.

Court clerk Heidi Baumann-Becker said Thursday the unidentified driver can appeal the decision, handed down in November, to the Swiss supreme court.

The Blick daily newspaper in Zurich reported the fine was more than twice the previous Swiss record of about $107,000.

Anonymous said...

For those w/o a long history of reading here, it is noteworthy that the 1929 stock market crash was preceded by a 1926 Florida land bust (ring any bells???)…

Anonymous said...

Spanish unemployment at new records: 19.3% and 40% for the young.

Spanish unemployment rose to the highest in more than a decade in December, 19.3%, capping a year that saw the nation’s jobless rate soar to double the Euro- zone average. The number of people registering for unemployment benefits increased by 54,657, or 1.41 percentage points from November to 3.92 million.

Rodriguez Zapatero and Socialists are trailing the conservative opposition according to the latest opinion polls Rodriguez Zapatero and Socialists are trailing the conservative opposition according to the latest opinion polls

From a year earlier, unemployment climbed by 25%, admitted the Spanish Labour Ministry on Tuesday. The only good piece of news this year was that the number of jobs destroyed in 2009 was 200.000 less than in 2008.

Anonymous said...

Expanded money supply, high unemployment, and recession = stagflation?

U.S. spending its way to stagflation

So, how can we forecast a 4% to 5% inflation rate for 2010? If the recession is not over, shouldn’t we see deflation continue? The answer is somewhat counterintuitive, but it is not a new phenomenon, it is called stagflation. It was last seen during the 1970s, after the U.S. eliminated the gold standard and had to pay for the Vietnam War and the irresponsible spending programs of the late Sixties and Seventies. Inflation ran into double-digit territory at the same time as we experienced recession and high unemployment.

The administration’s lack of fiscal restraint is going to result in unprecedented levels of printing by the Fed. Under the current forecast, the U.S. Treasury needs to raise around $4-trillion to finance a $1.5-trillion deficit and to replace Treasury debt that is due to expire in 2010. In the last five years, issues of new Treasury securities have already climbed from a couple hundred billion dollars to $1.5-trillion in 2009, to double that in 2010. The debasement of the dollar that started in 2009 is certain to continue — and with it inflation will come, starting in 2010.

Unless the U.S. government reverses the current trend and cuts spending dramatically, inflation is soon going to accelerate to levels we have never experienced in this country. Never before have we had such reckless monetary policies, not even in the Seventies.

Anonymous said...

The Resurgence of RE!!

RE making a bounceback! I will finally be able to sell off my investments to someone...

Anonymous said...

Has anyone noticed that the USD/INR conversion rate is back to hovering around 45 after a few months? It had reached 51.5 in March'09. That is almost a 12% decline in dollar denominated assets!

This means a) the USD is weakening (the commodity inflation cycle starts), b) the INR is getting stronger (lower earnings for IT sector) or both. I wonder what the impact of this will be on Indian Real Estate.

If RBI has to artificially hold the exchange rate at 45 to help exports, they will increase their dollar reserves and encourage people to buy dollars for investments abroad. So, there will be a capital outflow from India, what part of that will be sucked out of real estate?

I will buy my property in 2012, after the Mayan prediction comes true. In case you don't know, a bunch of pot smoking red-Indians predicted the collapse of the Indian real estate bubble in 2012.
Their calendar had beautiful pictures of the marine drive in Bombay with high rises all around and no pages in the calendar after 2012. That's what it is....


Anonymous said...

The Myth of Indian Realty

Anonymous said...

First time in the history, TOI saying something negative about real estate developers

Anonymous said...

What LODHA wants to say? There is no bubble.

Anonymous said...

LODHA is one greedy LORA misguiding people.

Anonymous said...

anon@9:57 PM

I totally agree with the wsj article. Sometime back I spent quite a bit of time analyzing financial statements of Realty Majors (like DLF, Unitech, HDIL and indiabulls).

I came to the conclusion that all these players have substantial inventory overhand and debt in their books. At the same time, due to capital WIP they do not have cash and therefore they always needs short term debt (for the past 4 years at least this has been the case). This debt they have been servicing via ECB's, FCCB's and QIP's. However large FII's and DII's are now becoming wary of the realty bubble popping. The event to notice here was D E Shaw's PE group withdrawing from DLF (to the tune of $500+ million dollars) and similarly, a spate of Indian companies are now shunning RE. This is a bit similar to what happened with the Dot Com bust in 2000-01. A lot of Indian companies quietly withdrew all plans in Dot Com at that point...So the writing is on the wall for these RE players and the RE market.

What do they do next? So the next source of cash is the public. A spate of IPO's are supposed to come out shortly. However, before an IPO, one needs to create an interest in the "offering". So you will see all kinds of gimmicks now with news media, analysts and all forms of propaganda blasting you with the exciting opportunity in RE. If people fall for this they will buy stocks of dummy companies on the verge of a collapse and will become the greater fools. RE companies have a history of conning the common idiot on the street and defrauding people en masse...

Stay away from this propaganda and don't buy RE IPO's as WSJ advises.

Oh I almost forgot, if RE does not manage to raise money(in the news channel they will say that they were oversubscribed some 50 times, ignore it), this will be the beginning of the end.

Anonymous said...

Just to substantiate my earlier rather long post, I had a look at the MF holdings for DLF at moneycontrol's site.

Have a look :- Fund Houses Holding DLF stock

Some conlusions -
1. I know that Birla's and Reliance Capital as well as Kotak have announced that they are exiting their RE holdings completely.
2. If you look at the table month wise most of the MF's have almost completely exited the DLF stock by december or truncated their holdings drastically.
3. If any notable MF's have holdings in DLF its either because they have a Index fund (and since DLF happens to be in the Index, it has benefited) or else through QIP etc. In all cases MF's are substantially underweight on DLF (less than 1% in almost all cases).
4. Trends towards the bottom of the table show that MF's are exiting DLF rather rapidly from 6000-8000 just 3 months back to about 3000 in Dec and this is when the markets have peaked and DLF/Other RE players are trying to take advantage of peak market conditions by bringing out IPO's. Which implies that MF's do not place much faith in RE IPO's and if at all they get good rates during IPO's might exit their 0.5-0.8 % holdings too!!!
5. For Anon above who posted Unitech's "stellar" revenue record this year. Have a gander at Unitech's and MF's

Almost all MF's have exited Unitech!!! The trend at the bottom of the table shows that holdings have declined from 33,000 to 5,000!!!! Think about it!!! The "Market" / Smart Investors who have much more resources than you and me to find out what is the true picture for these companies is in the process of orderly exit from this sector just when these Realty players are desperately trying to raise money via IPO!!

Anonymous said...

Well, isn't Mittal Steel building a plant in Jharkand which, as we recently came to know, is being run by a corrupt government?

Didn't Bangalore develop and flourish as an IT powerhouse under Congress?

Didn't Hyderabad continue its IT flourish under Congress, when led by YSR?

Didn't TN continue to flourish under the corrupt Jayalalita government (remember all the stuff that was recovered from her home, and the unaccounted income)?

The above are just a few facts to counter your claim.

Businesses setup shops wherever it's cheaper for them to produce/manufacture or to do business -- where they get tax holidays (like Karnataka gave to the IT companies), cheap labor and security for their investments. It has nothing to do with corruption -- but a lot to do with bureaucracy which was significantly curtailed with the liberalization drive under the Congress government in the early 90s.

Anonymous said...

This is the height of corruption in India:

Anonymous said...

Indian Govt. is trying to save the mafia from collapse. Why can't people in higher positions see what an ordinary man like me can see. Massive corruption and inflated home prices. Well, time will tell.

Anonymous said...

Looks like Affordable housing has bust before it could bubble

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