Yes! COMMON MAN is getting benefits from FASTEST GROWING economy

Guys this month beginning we had a discussion about the above mentioned topic. And I kept the topic for open discussion, which never happened after couple of responses from Uday & Richa! never mind. Today I read an article in Sunday Times of India by Swaminathan Aiyar.
I advise all my readers to go through that article. For those who cant, for them I am presenting some of the numbers from the article here.

The below numbers from a survey covered all dalit households in two blocks in UP, one in the relatively prosperous west (Khurja) and one in the backward east (Bilariaganj), between 1990 and 2008.

• Pucca houses rose from 18.1% to 64.4% in the east & from 38.4% to 94.6% in the west.
• TV ownership improved from virtually zero to 22.2% and 45% respectively.
• Cellphone ownership increased from almost nothing to 36.3% and 32.5% respectively.
• Fan ownership, curbed by electricity shortages, rose to 36.7% and 61.4% respectively.
• Bicycle ownership up from 46.6% to 84.1% in the east and from 37.7 to 83.7% in the west.
• Ownership of two-wheelers improved from almost zero to 7.6% and 12.3% respectively.
• In times of distress, dalits historically mortgaged jewelery to upper caste lenders. The proportion that does so has dropped from 75.8% to 29.3% in the east and from 64.6% to 21.2% in the west.
• The proportion eating roti-chutney for lunch, socially viewed as low-class food, has fallen from 82% to just 2% and 9% in the two zones.
• The proportion of kids eating the previous night’s leftovers plummeted from 95.9% to just 16.2% in the east.
  
• The proportion eating broken rice fell from 54% to 2.6% in the east, and from 22.7% to 1.1% in the west.
• Per capita availability of dal in India has been falling. So it’s heartening that dalits consuming dal are up from 31% to 90% in the east, and from 60.1% to 96.9% in the west. This may be one cause for rising dal prices.
• Traditionally, dalits were mainly agricultural labourers. In the reform era, they have diversified into non-traditional work. The dalit proportion benefiting from migrant relatives is up from 14% to 50.5% in the east, and from 6.1% to 28.6% in the west.
• The proportion running their own business is up from 4.2% to 11% in the east and from 6% to 36.7% in the west.
• The proportion in agricultural labour has plummeted from 76% to 45.6% in the east and from 46.1 to just 20.5% in the west.
• Per capita income is growing almost 10 times faster than in the Nehru-Indira era, and dalits are sharing the new prosperity.

Here one common thing you can notice in all above mentioned bullet points and that is private sector participation and competitiveness between them. For example from first bullet point, you can notice TV, Cell phone, Fan, Bicycle, Motor cycle, Mortgage (Banking services), Availability of non agricultural avenues are improving common man's status directly and indirectly.

So all this happened last 10-15 years helped by LPG (Liberalization, Privatization & Privatization) which is initiated by then Government in 1992 (Manmohan Singh) & 1997 (P Chidambaram)

The point is, after 1997 we haven't seen any revolutionary reform from the government due to various reasons. So when we are thinking about achieving double digit GDP growth next decade, we cant be complacent thinking history & past reforms, we need to take certain bold steps.

And once government does its part then comes turn of Private sector & common man of contributing to their share.

In today's same STOI, I read an article from Chetan Bhagat. Its also good article, you can have look at it also...

Opportunity Cost Is Too Much Part 2

So continuing from my yesterday's point, I am trying to tell that traders will always be looking out another best opportunity in the market. So basically they want to churn their portfolio. But in this churning process they end up doing many things like...

1. Paying more brokerage
2. May not able to buy back the shares which they sold after booking some small profit. Take a example if I buy Axis Bank shares @ 250 and sells them at 300 or 350 thinking that 20% to 40% profit booking. But if starts moving beyond 300 or 350 what a common feeling will be is if it comes below that we will buy it back but most of the time we will not buy back it.
3. Meanwhile they try to find one more stock which is going up & may end up in buying over bought stock.

If you would have invested 1 lakh in each of the following stocks which I mentioned in the table in 2009 March of total 4 lakh. Now it would have become around 19 lakh like 7 Lakh from Axis Bank, 3.5 Lakh from Aban (Even though Aban went upto 1600 & presently trading around 800 odd), 5 Lakh from Tata motors & 3 from SBI. Which is almost 5 times your principle in Just 2.5 years. But this kind of return you will get only in recovery from recession bull markets.

So what I want to say that, if you believe in any idea/stock please hold onto it with proper trailing stop loss, sector watch & overall market movement.

And before concluding some updates from economy...

1. Monthly inflation data released recently is 8.5% according to new WPI series which is reconstructed by changing base year from 1993-94 to 2003-04

2. Today, I mean yesterday Reserve Bank of India (RBI) increased Repo & Reverse Repo by 25 & 50 basis point.

3. IIP data which released recently was 13.5% was way beyond the analyst's expectation.

Opportunity Cost Is Too Much

So you may ask first question itself that what is opportunity cost? Opportunity cost is the cost of an 2nd alternative that must be forgone to pursue 1st one. In more layman term, by opting for one choice (out of two/multiple choices) what is the loss that we are incurring for not opting for another one.

You may remember, in last couple of trading sessions Sensex has regained its 19000 mark from January 2008. And market bottomed in March 2009 around 8000 levels in Sensex. From that level present level Sensex return is 137% considering 1900 levels in Sensex.

When market was bottoming out around 8000-9000 levels, I (in the sense many people would) have identified certain well known company's stocks like Axis Bank, Aban Offshore, SBI, Tata Motors.

Now if you take these kind of stocks' returns over the same period, from March 2009 to till now, you can see the kind of return Market has given over the same year & above mentioned individual stocks

Stock Name	March 2009 Price	Present Price	% Return
Axis Bank	200	1400	600
Aban offshore	250	850	240
Tata motors	200	1000	400
Stae Bank of India	900	3000	233
Market	8000	19000	138

will continue tomorrow because I am feeling sleepy...

Comments for previous posting & My Response

uday said...

The irony is - Inspite of India being a Agricultural country, inspite of the fact that India is believed to 'Live in the villages' - these idiot rural indian masses are at the mercy of urban India. Why should they need any government to solve their problems. All the intelligent and capable masses from rural india migrate to metro with greed of big salaries - only waste bodies stay back. Most rural population is good for nothing people thinking that it is responsibility of the Indian govt to take care of them.

September 8, 2010 2:19 PM

Richa said...

Very true, Naveen. These are words of common man....U Me n everyone..
BUT blaming govt. is it always correct? What are we doing to improve things?
Questions? May be we cant do anything, but why not one amongst youth gets into politics to do gud for the NATION....Again a question???

My Response:

First I would like to thank Uday & Richa for reading the article and taking trouble to comment on that. Now coming to comments part I don't buy some of the comments of Uday & Richa, of course they may be correct in their own way.

Because there are structural issues which only government can handle. For example we are now enjoying the benefit of LPG (Liberalization, Privatization & Globalization) which is again started by then government in 1992 by Mr. Manmohan Singh. So government should take the initiative to do the things better, allow the private players in some of the specific areas step by step to participate & then we can argue that government cant do everything.

Now take the following examples...

Inflation

When world is at the door step possibility of double recession/slowdown/deflation, we Indians are facing the problem of Inflation. Food Inflation is the main culprit in that. And main problem for this is PDS (Public Distribution System) is so pathetic, corrupted & license raj.

For example government is supplying Rice @ Rs. 2 to BPL through PDS. But more than 50% of it is not reaching the targeted people, because middle men are selling same Rice in open market for market rate approximately to Rs. 20. This is just one angle for Inflation & other angle is preservation of food articles, even Supreme Court has given suggestion government that instead of wasting them & distribute to poor people.

In places like Delhi, more than 40% of water & 35% of power leakage & theft is happening, which is Capital of country & where in now we are conducting Commonwealth Games whose preparations are another disaster.

These are just a simple examples how the systems in place are working.

Today, I read an article where in Infosys Mentor Mr. Narayan Murthy is talking about India's problems.

I request to all my readers to please read that article here...

Some important points, he mentioned are as follows...

--> Even 63 years after Independence, 35 crore (350 million) Indians can't read and write.

--> Twenty-five crore (250 million) people do not have access to safe drinking water.

--> While 75 crore (750 million) have no access to sanitation facilities, Murthy said.

--> The country has the largest mass of malnourished children, and 35 per cent of (total production of) grains are allowed to rot.

--> India has an installed electricity generation capacity of 145 gigawatts but only 84 gigawatts are available, which is "sadly a shame

--> Lot of it is due to poor (public) governance. There is no doubt about it. Unfortunately, our public governance is inadequate. Whatever our public governance has touched has not made as good a progress as private governance has. While all of private governance may not be good, private governance institutions have by and large done better because of competition, entry of multinational companies and the need to compete at the global level.

And I read one more article in rediff about global competitiveness of different countries in different segments. And some important points in that are...

--> It ranks 104th in the health and primary education pillar, with high rates of communicable diseases and high infant mortality. Indeed, life expectancy in India is 10 years shorter than in Brazil and China.

--> Infrastructure (86th) is in need of upgrade, especially with respect to quality of roads, ports, and the electricity supply, with India falling 10 places in this area this year.

--> Labour markets are also in need of greater efficiency and flexibility (92nd).

--> And overall India's rank 51st

Bottm line:
Topic is open for discussion...

Does COMMON MAN getting any benefit from so called FASTEST growing economy!!!

This is the thought whenever I come home & meet people here in home town. In fact I feel they are hopeless about our country's future! This is not my one time experience, last 2-3 times when I came here & met different people from different background (Age, Income & Family background). I am mentioning all these age, income & family background because I cant draw a conclusion from any one person's thinking from his backgrounds.

So last time when I was in home, I met one of my uncle & from the discussion we had, I thought his thinking is limited so no need to give any attention. But this time when I met one my grandfather & some other people I had same kind of discussion. So from this discussion I am drawing the above statement as conclusion...

In Bangalore or for that matter in Metros we think, we as a country are progressing after seeing so many things like GDP numbers, Infrastructure (presently however may be pathetic it is!),
Private Jobs & their Income level, Stock market, English media (Paper & TV) articles & analysis (because regional TVs & Papers usually don't cover this kind of news because here also I can draw same conclusion that they don't serve this kind because their target audience are not at all bothered about all the above mentioned things). When I start discussing all these above mentioned things with my high funda data, they simply don't agree with me because they have their own concern in some of the below mentioned things like...

1. Inflation

When they say Inflation, they are not aware & worried about the percentage point. Because I also feel that Inflation measurement itself is in so much controversy, so real inflation numbers GOD ONLY KNOWS! So here when they talk about price hike not inflation (because they are not even aware that in simple terms price hike itself is inflation). Their concern is price of almost everything including food articles (even though they are producing some of these & not getting the benefit due to middle man) is increasing much faster as compared their income. Their point of argument is now everything has become purely business & above their reach, be it agriculture, health, education & etc.

2. Government Working Style/Administrative Hurdles

On this they give one whole night lecture & I can also write lot of things. But bottom line will be same, government is not doing adequate what it is supposed do for common man. Be it from giving sufficient facilities (in one article from Swaminthan's I read, government's Rs. 1 worth of facility to common man is costing around Rs. 3.5 crores!!! I was shocked to read this), corruption, bureaucracy, fighting for power, no intentions at all for development & etc.

3. Legal Issues

As we all know how fast we are getting judgments from judiciary system for all variety of cases be it red handed captured terrorist case, be it simple accident cases, domestic violence cases, be it a cop molesting a woman/girl, be it murder case of bar girl by influence people & etc. And even if you get verdict from court also there will always be higher court to re-appeal your case. And surprisingly if you get verdict from highest court also people will go for President's mercy petition! In addition to all these, there are people called as human rights organizations...

4. Other issues like

--> Inter state issues regarding territory, river & dams building to those rivers, current sharing, language, non residents of their state issue & etc.
--> Basic infrastructure needed in rural areas like connectivity in terms of roads & schools, health related medical centers @ etc
--> Naxalism
--> Terrorism
--> Caste ism & related problems
--> Strikes & etc


So Bottom line is:
Anybody's guess!!!