"The idol of today
pushes the hero of yesterday out of our recollection; and will, in turn, be
supplanted by his successor of tomorrow."
—Washington Irving
(American, 183-1859)
Word for the day
Aeromancy (n)
The prediction of future
events from observation of weather conditions.
(Source: Dictionary.com)
Malice towards none
Do you trust Headley?
First random thought this morning
After living 7years in Mumbai, I shifted back to Delhi last year.
Personally, I do not find any perceptible difference in the air
quality of Mumbai and Delhi. My young kids haven't have any notable respiratory
complication in past one year. I do not suffocate during my morning walks or
evening strolls on the roadside. My neighbors have got their lungs screened
last weekend, out of paranoia. Doctors found no trace of toxins everyone is
claiming to be abundantly present in the city's air.
The website of Delhi Development Authority (DDA) still claims that
Delhi is "the greenest capital city" in the world. CBI may
investigate whether there is a major scam behind all this!
Douse the fire, and make house fireproof - II
In past three decades, the steel and textile industries in India
have been a regular pain for the banking sector; responsible for demise of
development institutions like ICICI, IDBI, IFCI and UTI. Though the current
credit cycle is led by power and infrastructure sector - steel (including
mining) is no less a pressure a point even now.
A forensic study of the problems of the steel and textile
industries, to determine the causes of frequent relapse, would be in order. It
is especially critical in view of the virtually painless growth of capital
intensive automobile, telecom and pharma sectors. These sectors have managed
the global competition and grown without much protection from government.
In fact, so far the entire new economy (euphemism for information
technology, media, telecom and related services) has not been much of a trouble
for the banking system. We did not hear about any major defaults in the
aftermath of dotcom crash at beginning of this millennium. Even a major event
like Satyam, in later years, did not leave any scar on the banking system.
Capital intensive telecom industry has grown leaps and bounds in past two
decades, without bothering the banking system at all.
In past few years ecommerce sector has been logging high growth.
Most of this industry has been financed by risk capital. Banking system, a
major beneficiary of the growth in the sector, has not have much to bother
about.
I find the "large employer" excuse for continuous
protection to steel and textile sectors, much less persuasive now. I know for
sure, incrementally telecom sector has been the largest employment creator in
the country. Automobile and pharma sectors also do not lag much behind.
I have few questions bothering me. For example,-
(a) Isn't it a good time to
tell the errant entrepreneurs in steel and textile sectors to set their house
in order, become globally competitive or shut shops? My gut feeling is that
their total economic contribution to the economy would not be more than the
value of damage they must have inflicted to the economy in all these years, in
terms of bad loans, disruptions, labor unrest, litigation, etc.
(b) The growth in telecom
sector may plateau in next few years. There are indications that revenue growth
may no longer match the rise in costs. The spectrum auction next fiscal will
increase the exposure of banking sector to telecom industry significantly. Do
RBI, banks, industry and the government have a plan there?
(c) The first round of
elimination in ecommerce has already begun. This will only accelerate as the
industry matures. Though the direct exposure of banking system to the sector
may be low. But indirect exposure could be serious - housing, auto, education
and other personal loans to people who will lose their jobs. What's the plan
there?
(d) The push to Start ups
may entail larger participation of banking sector. Have we developed a robust
screening and due diligence mechanism to select only the right kind of start
ups for promotion? Or we plan to fund all and then count losses?
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