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 »

Enough talk of the economic and financial crisis on my last few posts. So now let it pass by for some time and get little bit personal. Yes, sometimes I do write some posts which might be personal but might be useful to my readers if I share my experiences with them.

Today, I’ll focus on some fraudulent companies posing as up and coming financial or insurance companies. Some companies also pose as investment funds looking to raise funds for investment in certain industrial or realty projects.

Their modus operandi is quite impressive. Most of the time they target the country side – in rural and semi urban areas where a huge section of people have good income. These people have very little option to leverage their savings as they have little choices. Only traditional fixed deposits or recurring deposits at banks and post offices are available. So when good speaking marketers enter their domains with promises of huge returns within a short period of time for seemingly small investments – the unsuspecting villager falls prey. The company representatives carry with them some glitzy leaflets, brochure of their companies and give lectures on how they will grow as big as Peerless in the next few years.

Just last week, someone from a certain company approached me to invest in preferential shares of a new company working for government projects in West Bengal little knowing that I run a business blog and am well versant with the industry though I might live in a non-descript corner of India. When he started his usual sweet lecture about who the big shots are already in their board of directors, I politely asked him to show all the government approval papers and if they have the required documents from concerned authorities. He told that – he is not authorized to carry original documents! But all the information may be found on their website! Now here is a catch they usually use to allay suspicion of prospective clients. As internet penetration and literacy is too low in India, people from semi urban areas have a mystic impression about the internet and websites because they don’t know about it whatever their educational qualification might be. Most of the time they get convinced and the fraud run away with their hard earned money.

These financial agencies also offer extra benefits such as commission to get newer investors and it works on chain system. Someone with pure commonsense might understand that these are nothing but big SCAMs and Ponzi schemes. Otherwise they can never pay up the promised returns.

The most depressing thing about this whole phenomenon is that, cheated individuals have no where to go for complaints as most of these deals are done at homes and legal actions can hardly be taken due to lack of proper evidences. The so called company executives roam around from place to place and have no permanent or temporary office nearby as they claim that their company is still new and has only the registered office. The obviously promise to set up their office here in the future once their client base has grown substantially so that they can process client claims locally. But as I mentioned before –most of these are frauds, scams.

So be very careful with such shady companies. My advice would be – don’t fall for them at all. Just excuse yourself when such people approach you with offers. If you have intentions to save, save it in time proven schemes such as bank deposits, LICI policies, post office deposits. After all, there was a newspaper report recently that top leaders from across parties are all followers of traditional saving schemes like KVP, Government bonds or just normal recurring deposits.