Monday, 30 April 2012
A WORD OF CAUTION FOR INDIA
A recent addition to my personal library
is a glossy, picture book titled – “100 CITIES OF THE WORLD : A journey
through the most fascinating cities around the globe.”
As I glanced through the Contents
listing the hundred, Continent-wise, I was struck by the fact that
India’s capital, Delhi, was not included in this list. The two Indian
cities mentioned in the Asian tally of twenty two were Kolkata and
Mumbai.
For
Indian readers, a more interesting addition to my library this week is a
thought provoking book by Ruchir Sharma, head of Emerging Market
Equities and Global Macro at Morgan Stanley Investment Management. In
this book titled Breakout Nations, the author, who is
based in New York, affirms that “the astonishingly rapid growth over the
last decade of the world’s celebrated emerging markets is coming to an
end. The era of easy money and easy growth is over. China, in
particular, will soon slow, but its place will not necessarily be taken
by Brazil, Russia or India, all of which have weaknesses and
difficulties often overlooked in the inflated expectations and emerging
markets mania of the past decade.”
This book identifies “graft driven
inflation” and “crony capitalism” among the weaknesses and difficulties
that can be a damper for India’s high expectations.
Referring at some length to the series
of scams that have surfaced during the U.P.A. regime the author writes
that when he wrote about this for a Newsweek cover
story he was dubbed a party spoiler. Top government officials told
Sharma, “such cronyism is just a normal step in development, citing the
example of the robber barons of nineteenth century America.” “Prime
Minister Singh, asked privately about the corruption problem, supposedly
told people not to spoil India’s image by going on and on about this.”
This particular chapter dealing with our
problems starts with Europe’s nineteenth century fascination with
India’s well-known magic show, the Rope trick. The caption significantly
given to the chapter is “The Great Indian Hope Trick”!
Referring to the increasing investment by Indian entrepreneurs abroad, Ruchir Sharma writes:
“As soon as
companies from emerging nations start expanding their interests abroad,
it is usually celebrated as a giant step for the whole country. But in
India the moves suggest that many companies are going abroad in part to
avoid the problems of doing business in the home market. Lately
businessmen in Delhi and Mumbai have been complaining ever more bitterly
that the cost of starting new businesses in India has gone up
dramatically over time because of the sharp increase in the number of
demands for government payoffs. Investment by Indian business has
declined from 17 percent of GDP in 2008 to 13 percent now.
“At a time when
India needs its businessmen to reinvest more aggressively at home in
order for the country to hit its growth target of 8 to 9 percent
(foreign investment is well below the required totals), they are looking
abroad. Overseas operations of all Indian companies now account for
more than 10 percent of overall corporate profitability, compared with
just 2 percent five years ago. Given the potential of the domestic
marketplace, Indian companies should not need to chase growth abroad.
(In 2010 more than a third of Indian households had, by local standards,
a middle-class income equal to between $2,000 and $4,200, up from 22
percent in 2002½ But just over half the earnings of India’s top-fifty
companies are now ‘outward facing’ or dependent on exports, global
commodity prices, and international acquisitions.”
In his latest interaction however, with a
group of eminent economic thinkers (reported in today’s Indian
Express), Ruchir Sharma has been more optimistic about India.
***
A sector in particularly bad shape these
days is the airlines sector. You talk to any section of the Air India
staff - pilots, airhostesses, or any other - and you will hear endless
complaints. And this is in an airline which when I first traveled on
when I become an M.P. way back in 1970, had an excellent reputation all
around the globe. Even private airlines like Kingfisher are facing a
serious crisis.
So, it was a delight to learn that the
newly constructed Indira Gandhi International Airport has been reckoned
as the sixth best airport in the world, and in a certain specific
category the second best. The evaluation has been done by the Airports
Council International, a worldwide association of airports having 575
members operating over 1633 airports in 179 countries.
Passing through this newly built airport
which caters both to domestic as well as foreign services, I was
impressed by a beautifully sculpted tableau of the twelve postures which
add up to the well known Yoga exercise of Surya Namaskar. The sculptor,
I discovered, is one Ayush Kasliwal of Jaipur. Hearty compliments to G.
Subba Rao of G.M.R. who must have conceived it, and the artist who has
executed it.
It did remind me of the rumpus raised by
some perverse politicos when Shivraj Singh Chief Minister of Madhya
Pradesh initiated a massive programme of Surya Namaskar in the schools
of the state. Those objecting to the exercise said that the State
Government’s proposal was anti-secular. It is believed that since
January this year lakhs of students in more than 6000 schools have been
doing Surya Namaskar in the state.
TAILPIECE
This blog begins with a reference to Ruchir Sharma’s book Breakout Nations.
The prologue to this book is a caustic comment on the sort of vulgar
decadence that seems to be infecting the life style of the affluent
here. Sample these opening paragraphs:
It’s been a long
time since the farmers left the “farmhouses” of Delhi, and though the
name lives on, it now describes the weekend retreats of the upper class,
playgrounds on the fringes of the city where unmapped dirt lanes wind
through poor villages and suddenly open onto lavish mansions with
sprawling gardens and water features; in one case I even came upon a
garden with a mini-railroad running through it. This is the “Hamptons”
of Delhi, the city’s party central, where event planners will re-create
Oscar night, Broadway, Las Vegas, even a Punjabi village for the
home-sick, complete with waiters in ethnic garb.
On a foggy night
in late 2010 I made my way to one of these famously decadent bashes,
where the valets were juggling black Bentleys and red Porsches, and the
hosts invited me to try the Kobe beef they had flown in from Japan, the
white truffles from Italy, the beluga caviar from Azerbaijan. It was
hard to talk over the pulsating techno-beat, but I managed to engage in a
chat with a twenty - something son of the farmhouse demimonde – he was a
classic of the type, working for his dad’s export business (it always
seems to be “exports”), wearing a tight black shirt, hair spiky with
grooming gel. After determining that I was a New York – based investor
back in town to search for investment opportunities, he shrugged and
remarked, “Well, of course. Where else will the money go?”
“Where else will
the money go?” I left the Party around midnight, well before the main
course was served, but the comment stayed with me.
L.K. Advani
New Delhi
April 30, 2012
New Delhi
April 30, 2012
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