The retail conundrum - III
We find a strong equity culture amongst Indian
households. However, factors like fewer employment opportunities, better
business opportunities and dismal performance of publicly traded equity have
led them to invest more in their own business and/or home equity rather than
listed equity.
The need therefore is to reinvent the Gandhian model of
socio-economic development by focusing on small household enterprise, rather
than relying on Nehruvian model of unbalanced growth and development of large
enterprise, that has mostly failed in promoting inclusive growth.
The debate on the household investors’ indifference to the
listed equity would be incomplete and totally misdirected if we ignore the
structural changes in Indian economy in past two decades.
In our view, post liberalization of trade and commerce in
1990’s, the number of self entrepreneurs has certainly increased in the
country. This has coincided with the sharp fall in public sector employment.
The aggregate private sector employment level has not been able to compensate
for fewer opportunities available in public and unincorporated private sector.
Consequently, the total number of employees on live payrolls has fallen sharply
since early 2000’s.
The combination of two – lower employment opportunities and
liberal business rules – has perhaps forced people towards entrepreneurship.
The number of self owned enterprise has swelled in past one decade, implying people
are investing in more in equity, but not in listed equity.
(a)
As per 67th round of NSSO survey
(June 2011), there were 58million unincorporated enterprises in India
(excluding agriculture, construction and those registered under Factories Act).
Over 85% of these enterprises are run by the owner himself, without any hired
worker. 44% of these were run from the residence of the owner. These
enterprises employed 108mn people against just 39mn on the live payroll in
organized sectors, including 11mn in private sector. (Source: RBI, NSSO)
(b)
These self owned enterprises generated annual gross
profit of Rs6283.56bn; whereas all listed companies in India generated gross
profit of Rs610.44bn in FY12. 1/3rd of this profit was earned by top
36 PSUs. Top 100 listed companies accounted for over 76% of this value
addition.
The point we are making is that there is a strong equity culture
amongst Indian households. However, factors like fewer employment
opportunities, better business opportunities and dismal performance of
publically traded equity have led them to invest more in their own business
and/or home equity rather than listed equity. With most of your net worth in
your business’s equity, you obviously need protection of gold.
(Source: RBI, NSSO)
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