Thought for the day
” Lawless are they that make their
wills their law."
-
William Shakespeare (English, 1564-1616)
Word for the day
Bevy (n)
A group; an assembly or collection.
(Source:
Dictionary.com)
Teaser for the day
Surprisingly Congress Party does not appear to be making
much effort to ask voters, who have rejected it, what went wrong!
The leaders are audaciously persistent with their claim
that gullible and innocent voters were misled by the false propaganda of BJP
On the brass tacks -III
Capital and enterprise are two most critical elements for
sustainable growth in any economy. At present Indian economy is facing
inadequacy of both.
Capital adequacy
Capital could be in the form of risk capital (equity) or fixed
return capital (debt). For long gestation high risk infrastructure projects in
a developing economy where capacity to pay for services is always questionable
usually risk capital should be preferred. But the model adopted in India relies
heavily on debt capital. This narrows down the problem to (a) lending
capability of the banking system and (b) managing capability of entrepreneurs.
In my view the lending capability of Indian financial system is
lacking in all three aspects, viz., (a) capital adequacy; (b) technical
expertise and (c) transparency and accountability.
As the following chart from Business Standard (4 Sep'14) shows,
the capital adequacy of Indian banks has consistently declined past 6years.
Many recent cases have also highlighted that even leading financial
institutions have failed in performing due diligence in several large debt
deals. Even more bizarre is the fact that the failure has been recurrent in
many cases.
Lack of an active broad debt market has also limited the
capability of borrowers to raise money at efficient price.
Capital controls in various forms have also limited the ability
of overseas investors to invest in capital starved infrastructure sector.
A sustainable growth path would thus prerequisite serious
reforms in financial sector, including but not limited to a zero based review
of FDI regulations, making banking sector adequate in terms of capital,
technical expertise and accountability, and change in low equity model
infrastructure development.
The new government has shown some promise in this direction, but
implementation is yet to be seen..to continue tomorrow
No comments:
Post a Comment