Thought for the day
"Tact is the art of making a point
without making an enemy."
-
Isaac Newton(English, 1642-1727)
Word for the day
Veridical (adj)
Truthful; veracious; corresponding to facts; not illusory;
real; actual; genuine.
(Source: Dictionary.com)
Malice towards none
Indians have this natural
tendency to support the underdog and humble.
BJP knows it well. They have
seen this in 2009 MMS vs. LKA contest.
Do we believe what we know?
What is it we really want?
To accelerate the economic growth in order to generate more
employment and improve the quality of life of Indian populace, the country needs
huge amount of capital.
Various economists, government agencies and expert committees
have suggested that to attain optimum level of employment Indian economy would
need to grow 8-10% CAGR for next decade or so.
The capital investment required by private sector to create
critical infrastructure to support 8-10% GDP growth is pegged in the range of
US$10-12trn over next 10yrs. Energy sector alone may need investment of more
than US$1trn over next one decade.
It is well recognized fact that such kind of long term risk
capital may not be available internally.
Foreign investment is therefore a pre-requisite for the process
of economic planning, development, and growth.
Any debate on path, trajectory and sustainability of growth
should therefore begin with this assumption that adequate foreign capital would
be available.
A pragmatic economic development and growth plan under the
current circumstances should acknowledge the following in the preamble itself:
(a) India needs huge
amount of long term risk capital to achieve the goal of fast, equitable and
sustainable economic growth and development.
(b) Meeting of this
goal is materially contingent upon flow of foreign capital.
(c) Despite
unprecedented liquidity sloshing the global financial system, the risk capital
that could be for long term to emerging markets like India is scarce and may
become expensive as US Fed begins the "Lift".
(d) The long term
risk taking foreign capital will come to India at its own terms and not at the
whims and fancy of the politicians and myopic bureaucracy.
...do we want to follow the herd?
However, what is true for long term risk capital (commonly known
as FDI) may not be true for the short term arbitrage money (commonly known as
Foreign Portfolio Investment or FPI).
This is the money that usually is not invested by the owner of
the money. Instead professional investors who are paid to maximize the returns
for owners of the money, exercise the control over such money.
Their interest in the investment is limited to the remuneration
they would get. The remuneration is usually based on the relative performance
of the money invested over a small period of time (usually 12 to 36months).
In order to maximize their remuneration, these fund managers
would chase the relative outperforming assets in a most secular fashion - with
no regional, racial or systemic bias. They would go to communist China, chaotic
Russia, democratic India, war torn Africa, vulnerable Chile & Columbia,
struggling Dubai, or bankrupt Greece.
As most of them move in a herd, they cheer the market by driving
up the asset prices with huge collective inflows in a short span of time.
They inflict severe pain and cause huge volatility by their
ruthless collective exit.
There is little evidence to establish their long term positive
impact on the investee market or economy. However, there is enough anecdotal
evidence to show the damaging impact of the excessive volatility caused by
their collective actions.
The south east Asian economies suffered tremendously at their
hands during 1990's.
We did also have few instances of irrational boom and bust cycle
driven by collective withdrawal of FPI money. 1998 post nuclear blast exodus,
1999-2001 dotcom bubble and bust, 2006-2009 easy credit driven boom and bust
are some major incidences.
Besides, we have seen frequent collective actions to pressurize
the government and regulators over issues such as taxation (MAT, DTAA) and
transparency (P. Note disclosures), etc.
On most occasions the government and the regulators have given
in to the pressure, deciding to maintain the status quo. Consequently, (a) many
nagging issues have accumulated that would keep the FPIs and agencies at
confrontational path for many years; (b) the message to FPI is that Indian
government and agencies accord significant importance to the stock market
indices and are willing to walk extra mile for a few billion USD of FPI flows.
Currently Indian markets are witnessing yet another instance
pressure tactics. The indications are that the government will give in yet
again.
Tomorrow I shall examine the trend and role of FPI investments
in India.
Interesting reads:
Trivia
Three questions that bothered me yesterday:
1. Why should
people be critical of Rahul Gandhi deciding to undertake a journey across
India? The country only stand to gain if he gains a better understanding of the
country, her people and their problems. No one will miss him in New Delhi. No
one would lose anything.
2. Why is it necessary
that the home minister gets to know about a natural calamity in the country
before anyone else does?
3. Hand on our
hearts - How many of us 125cr Indians believe that politicians in general would
place the country and humanity before their families and business?
I sincerely
believe that not more than a million people will raise their hands to this
call.
Then why this
hypocrisy? Why we want the same politicians to maintain a facade in public and
say things they do not mean? SP leaders were honest and not naive in expressing
their concern for their family members!
Thought for the day
"Tact is the art of making a point
without making an enemy."
-
Isaac Newton(English, 1642-1727)
Word for the day
Veridical (adj)
Truthful; veracious; corresponding to facts; not illusory;
real; actual; genuine.
(Source: Dictionary.com)
Malice towards none
Indians have this natural
tendency to support the underdog and humble.
BJP knows it well. They have
seen this in 2009 MMS vs. LKA contest.
Do we believe what we know?
What is it we really want?
To accelerate the economic growth in order to generate more
employment and improve the quality of life of Indian populace, the country needs
huge amount of capital.
Various economists, government agencies and expert committees
have suggested that to attain optimum level of employment Indian economy would
need to grow 8-10% CAGR for next decade or so.
The capital investment required by private sector to create
critical infrastructure to support 8-10% GDP growth is pegged in the range of
US$10-12trn over next 10yrs. Energy sector alone may need investment of more
than US$1trn over next one decade.
It is well recognized fact that such kind of long term risk
capital may not be available internally.
Foreign investment is therefore a pre-requisite for the process
of economic planning, development, and growth.
Any debate on path, trajectory and sustainability of growth
should therefore begin with this assumption that adequate foreign capital would
be available.
A pragmatic economic development and growth plan under the
current circumstances should acknowledge the following in the preamble itself:
(a) India needs huge
amount of long term risk capital to achieve the goal of fast, equitable and
sustainable economic growth and development.
(b) Meeting of this
goal is materially contingent upon flow of foreign capital.
(c) Despite
unprecedented liquidity sloshing the global financial system, the risk capital
that could be for long term to emerging markets like India is scarce and may
become expensive as US Fed begins the "Lift".
(d) The long term
risk taking foreign capital will come to India at its own terms and not at the
whims and fancy of the politicians and myopic bureaucracy.
...do we want to follow the herd?
However, what is true for long term risk capital (commonly known
as FDI) may not be true for the short term arbitrage money (commonly known as
Foreign Portfolio Investment or FPI).
This is the money that usually is not invested by the owner of
the money. Instead professional investors who are paid to maximize the returns
for owners of the money, exercise the control over such money.
Their interest in the investment is limited to the remuneration
they would get. The remuneration is usually based on the relative performance
of the money invested over a small period of time (usually 12 to 36months).
In order to maximize their remuneration, these fund managers
would chase the relative outperforming assets in a most secular fashion - with
no regional, racial or systemic bias. They would go to communist China, chaotic
Russia, democratic India, war torn Africa, vulnerable Chile & Columbia,
struggling Dubai, or bankrupt Greece.
As most of them move in a herd, they cheer the market by driving
up the asset prices with huge collective inflows in a short span of time.
They inflict severe pain and cause huge volatility by their
ruthless collective exit.
There is little evidence to establish their long term positive
impact on the investee market or economy. However, there is enough anecdotal
evidence to show the damaging impact of the excessive volatility caused by
their collective actions.
The south east Asian economies suffered tremendously at their
hands during 1990's.
We did also have few instances of irrational boom and bust cycle
driven by collective withdrawal of FPI money. 1998 post nuclear blast exodus,
1999-2001 dotcom bubble and bust, 2006-2009 easy credit driven boom and bust
are some major incidences.
Besides, we have seen frequent collective actions to pressurize
the government and regulators over issues such as taxation (MAT, DTAA) and
transparency (P. Note disclosures), etc.
On most occasions the government and the regulators have given
in to the pressure, deciding to maintain the status quo. Consequently, (a) many
nagging issues have accumulated that would keep the FPIs and agencies at
confrontational path for many years; (b) the message to FPI is that Indian
government and agencies accord significant importance to the stock market
indices and are willing to walk extra mile for a few billion USD of FPI flows.
Currently Indian markets are witnessing yet another instance
pressure tactics. The indications are that the government will give in yet
again.
Tomorrow I shall examine the trend and role of FPI investments
in India.
Interesting reads:
Trivia
Three questions that bothered me yesterday:
1. Why should
people be critical of Rahul Gandhi deciding to undertake a journey across
India? The country only stand to gain if he gains a better understanding of the
country, her people and their problems. No one will miss him in New Delhi. No
one would lose anything.
2. Why is it necessary
that the home minister gets to know about a natural calamity in the country
before anyone else does?
3. Hand on our
hearts - How many of us 125cr Indians believe that politicians in general would
place the country and humanity before their families and business?
I sincerely
believe that not more than a million people will raise their hands to this
call.
Then why this
hypocrisy? Why we want the same politicians to maintain a facade in public and
say things they do not mean? SP leaders were honest and not naive in expressing
their concern for their family members!
