Byapaar.com -The Indian Business Blog

Whatever is the case with Indian politics, one thing is sure though that there is an underlying consensus among all political parties that economic reform is the way to come out of that Nehruvian economic development which saw a sustained medium rate of Gross Domestic Product (GDP) growth also known in Indian economic folklore as Hindu Rate of Growth!

This consensus thing has become more pronounced when Left Front ruled state government in West Bengal has been trying hard to find vast spaces of land for big industrial houses interested in investing billions of $s in the state. Ironically, there is someone who is in their way of industrializing Bengal - it is their bête noire - Mamata Banerjee of the Trinamul Congress party who is doing the same same as the left parties did in the 60’s and 70’s - i.e. protect the farmlands which form most part of Bengal.

But I am not here for Bengal, I am here to talk about the new opportunities that has been brought about by economic reforms and rapid GDP growth over last 10 years or so.

Everyone is aware that Indian middle class is one of the largest in the world with huge level of purchasing power and MNCs come to India for them.  There are two groups though. One group is western educated, sauvé and highly urban working in the private sector with high salaries. The other group is semi-urban, traditionally educated, middle aged and look for security in government jobs. But members of both groups has one thing in common - ‘to own a house of their own’. While the first group had advantages so far to fulfill their dreams with their fat pay packages from so called sunshine industries (IT, ITes, Bio-technology), the second group had to think a lot before they took the plunge due to their low pay slips.

Some recent developments - both in the domestic and international scenarios have shifted the balance in this equation. The world economic meltdown caused by the now infamous US ‘Sub-Prime Crisis’ has affected the real estate and financial services sector more than anything else. With billions of square feet of real estate property lying vacant and liquidity crunch engulfing the world market, realty sector is not going to get hot in the near foreseeable future. Although most governments have taken several steps to infuse trillions of $s to come out of crisis, the market as a whole is still in the doldrums and real estate sector has simply crashed.

This is what I am talking about - a golden opportunity for all those who had to think ten times before owning a house in earlier scenarios. There are three plus points -

• Keeping with the rest of the world, Indian realty sector has also crashed.
• Indian banks have not been hurt that much with world liquidity crunch and with active initiatives by several branches of the central government through policy changes, the banking industry has been involved in home loan modification by way of rate cuts.
• The central government and most state governments have revised the pay structure of their employees with much higher pay so as to give the benefit of fast economic growth during last 10 years or so.

It is pure circumstantial that has brought about this opportunity. Now, a government servant is more suited to own a home or flat than someone working in the private sector. Employees in the private sector live in constant fear of loosing their jobs, Read the rest of this entry »

Different people have different needs at various stages of life. So they have to plan accordingly and make some investments for financial security. For long, state owned insurance companies like Life Insurance Corporation of India (LICI) have been offering lots of investment options in India along with traditional saving agencies like banks and post offices. LICI has been the most dominant player in this field with almost monopoly status.

But the scenario has changed since Indian economy started liberalizing and opened up the sector to private and foreign players through IRDA bill in 1999 amidst protest from many quarters. Not surprisingly the who is who of global insurance majors rushed into Indian market and set up shops after tying up with local companies who have little or no experience in insurance business. Soon the market became hot as news players started to market their products more aggressively seldom seen in India. People got spoilt of choice as agents now came to homes or offices with insurance quotes their offered by their respective companies. My intention here is not to write about the history of insurance companies but it is absolutely necessary to know the background for the main topic.

So everything has been going smoothly for all with a booming stock market and fast growing economy. It has been like honeymoon for both investors and insurance companies. But nothing in a market environment is permanent and one fine day in the middle of September this year everything came tumbling down as world financial markets crashed. As most insurance companies invest funds they collect from clients, most of them suffered huge losses due to the global financial problem phenomenon.

To cite a personal example, one of my colleagues invested Rs. 50,000/- with an insurance product offering high returns (thus highly risky) and linked to stock market with life insurance as an added option, Read the rest of this entry »

Indian Rupees slipped below the psychological mark of Rs. 50 against the US dollar on Wednesday as it came under heavy pressure from investors and oil companies in a market where the greenback has been scarce for the whole year. The global financial turmoil and imminent recession in industrialized countries have made foreign investors wary of the market and now they have started to withdraw funds from Indian equity

market. According to latest data available, foreign traders have already taken away US $13 billion from Indian market whereas by this time last year, they have pumped in US $17 billion. The pressure on the Rupee increased manifold over last couple of days due to high demand by oil companies who are scheduled to pay import bills at this time of the year. These factors made the Rupee very weak as there is very little supply of the greenback in the forex market. Market analysts and forex traders are speculating that it might slip further and cross Rs. 52 per US dollar mark during next few weeks.

On the other hand the Indian government continues to put up a brave face and is trying its best to ward off serious damages to the economy despite projections of lower growth rate. In its latest report the Center for Monitoring Indian Economy (CMIE) has put the rate of growth at 8% this year. But other agencies put the figure between 6.5 to 7 percent. Indian Finance Minister P Chidambaram said the government is taking more measures in the right direction and asked industries and service providers to cut prices during his speech at the concluding day of Indian Economic Forum, recently held at Delhi. He said -

“The classic response to demand slowdown is to cut prices for the short term ..”

According to him, price cuts will fuel domestic demand and improve sales thereby making balance sheets healthy. He told industry leaders that while banks are ready to lend money, consumers are nervous and are not ready to pay the current price. But CEOs are not impressed by government’s suggestion. They think that the interest rate must fall further before they can think of price cuts .

On another note, the government has announced some protectionist measure to shield local industries. It has re-imposed import duties on certain products including steel and soybean oil. It is also considering of lowering excise duties to give some relief to the industry.

Everybody knows Indian infrastructure is in tatters and government has taken this sector as its vehicle to pump in more money in the market. It is planning to double the stimulus package to US $10.75 billion and wants to work with the private sector very closely in this regard. Read the rest of this entry »