Byapaar.com -The Indian Business Blog

“I have been begging pardon from my readers again and again for not writing on this blog that now I have lost my face even to do that. Anyway, I consider this blog as some sort of personal and intend to use it to express my views on certain topics from time to time. As I have to maintain a regular job and also spend time on my commercial web properties, the posting won’t be regular though I want to write on a daily basis. So…….. ”

The other day we, colleagues at the school were debating on the current single most important problem faced by us, the common people – ever increasing rise of prices of essential commodities! One colleague, who is a die-hard supporter of a Left party was saying that he attended a party meeting the day before where a member of the party’s central committee attended and told the gathering (general public) that if the Central Government of India used the Rs. 900 billion for subsidizing food grains instead of helping industries, poor people of the country (those Below Poverty Line or called BPL) would have got rice @ Rs. 2/Kg. Very true – why help the rich and deprive the poor?
Or is it?

If the industry goes into recession – then the economy of the country is bound to collapse – don’t you get that?

Almost 65% of the people are engaged in agriculture – but how much does the sector contribute to our economy? One fourth? On the other hand industrial sector (taking service industry together) is contributing the bulk of the GDP.

So first thing – first. We must secure that our economy is in sound health, revenue to the government coffer roll in – only then we could spend them in development and social sector. It is not that the government is keeping people hungry. Even without those 900 billion Rupees that the Left are objecting (they are never industry friendly – say what they may) – Indians holding BPL cards are still getting rice @ Rs. 3/Kg.

Regarding the rise of prices of essential commodities – many political parties including some allies of the current UPA government are holding the Congress (I) responsible. But what can the government do? I think it should just regulate and not control the rise of prices which is natural.

Come to think of it – 25 years ago, I was a high school student and my teachers were getting a salary of around Rs. 1500/- per month. Rice was being sold @ Rs. 2.5/- per Kg. then. Now as a teacher I get roughly 20 times that my teacher used to get. So, salary of my post increased 20 times in 25 years where as price of rice (most essential commodity) – increased only 7/8 times depending on where you live.

And if prices of rice, wheat, vegetables or other essential products are not increased proportionately – then how can you help those poor farmers who produce them?

The other day I was reading a newspaper report about a grape grower’s suicide in Maharashtra because he was burdened with loans and although he was having bumper harvest, still he could not cope with the changing economic situation.

While prices of everything rose including grapes in the open market, the price of that he was getting from the middle-man didn’t change in last ten years. So he didn’t get the benefit of rise in price and was left behind the economic BOOM that our country has been witnessing.

Come on guys – be pragmatic and not get extra selfish. The rise of price is just a natural phenomenon that comes with rapid economic growth. Our system is not like China where the government can regulate strictly.

Just think rationally, think how much you pay for a kilo of grapes – and think about that grape growing farmer who was still selling them for Rs. 10/kilo. If we are really serious about alleviating poverty from our country we should have a pragmatic economic approach.

Our so called leaders – rather than giving tall lectures should help these type of poor farmers by developing a good transportation system, good storage system and also think about some kind of subsidy in case there is drought.

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 »

Amidst global economic turmoil and financial crisis caused by US subprime lending crisis that caused havoc in markets around the world, Indian nationalized banks in consultation with the government have announced reduction of interest rates on home loans of up to Rs. 2 million that could lead to partial impetus in the realty sector. Just last week industrial production in India contracted for the first time in 14 years.

According to the new rates set by the banks, housing loans of up to half a million Rupees will now have interests of 8.5 percent and that of loans between half a million to two million will have interest rates of 9.25 percent. Presently, interest for home loans is 9.75 to 10.5 across various sectors in the banking industry.

This brings very good news for millions common people who can not afford to think of a house or flat beyond Rs. 2 million. Another additional feature of the new housing loan package is that interest rates will remain frozen for 5 years which means clients will not have to worry about increased equated monthly installments (EMIs) during this period. Also they will enjoy the benefit of rate cuts in between while banks will take the burden if rates rise. After five years, consumers could choose either fixed or fluctuating rates according to their choice. This makes debt management a lot easier for the common person.

Not only this, but banks have also reduced the margin requirements for loans. While previously, borrowers were required to pay between 20 to 25 percent of the total amount as margin money, it has been trimmed down to 10 percent for loans up to half a million and 15 percent for loans between half a million to 2 million.

According to bankers, this move will see around Rs. 150 to 200 billion being released over next few years and help the common men who constitute eighty percent of nationalized banks’ housing loan book. Read the rest of this entry »