Investor’s Query: It seems a long time ago that I bought shares of Corporation Bank during their IPO. Not that I am complaining, but I wonder as to how people survive in India .I had a SB Account with the xxx branch. The then manager sent me some forms requesting I buy some shares. I made a very modest investment. Since then every year dividends are credited to my account. But the performance of the shares is somewhat disconcerting. Let me explain:
During those times a C$ was mostly worth around Rs. 8/-. I felt lucky when I got Rs. 8.72/- to a C$. After that the Rupee started sinking all the way down to Rs. 56/- to a C$. As of now the shares are Corporation Bank quoted at Rs. 382/-. Had I left the money in a SB Account at here, I would have received Rs. 56,000/- plus whatever the interest. I don’t know what to say except the Indian Economy is somewhat in dire states.
Yes, the Real Estate prices have zoomed to kingdom come. Do you suppose they are sustainable, or are they headed to a head spinning sliding vortex?
Until 2007, you couldn’t buy a 3BHK house in the US for less than $3,50,000. Now you are lucky if you can sell the same house for $1,50,000. Can this happen in India? I wouldn’t bet against it.
During my visit in 2011, I had lots of opportunity to observe the Market Place. I felt everything was very expensive, especially transportation. I was spending anywhere from Rs. 250/- to Rs. 300/- on auto rickshaws alone. Food prices were the same as here. Actually it is much more expensive when you consider bones and fat. You can’t buy pork, what you get is a slab of fat coloured red to make it look like meat. The same practice here would be considered as cheating. In India anything and everything is permitted. The more you can cheat and deceive the better off you are. Given this attitude, pray tell me who won’t cheat?
As to accommodation, the less said the better. Beachfront Five Star hotels in Mexico with one week lodging and all you can eat and drink (alcohol), plus air fare cost only C$ 499 to 699. Can you do better in India? Please let me know.
Mr. Gerard Colaco: People do not seem to have much difficulty surviving in India. There are presently 1.26 billion of us who appear to be surviving. In fact, people here appear to be better equipped to survive and thrive than people in some of the ‘advanced’ countries. The reason is, we know that we are on our own and the government of India is not going to look after our welfare.
In many advanced countries, the population looks to the government for leadership, direction and economic well-being. In India, we are happy if the government mainly gets out of the way. That is why, when Indians are exposed to a different environment, they thrive, which perhaps explains why so many Indians do well abroad. They innately know how to succeed without depending upon state or other systems to help them.
I do not agree with your observations about the Indian economy either. We have xxx clients, of whom at least xxx are non-residents. A good deal of them are in the Gulf, but a significant number are also in the US, Canada and Australia. They have no complaints about their Indian investments, especially when they have constructed well diversified portfolios of blue chip stocks or well diversified mutual funds.
Purchasing some stocks of Corporation Bank at the request of a bank manager is not investment. It is merely obliging a bank manager.
I was born in 1963. I started business in 1985. I have seen the progress India has made from 1991 to 2012, when it abandoned socialism and liberalised its economy. More and more people have moved from poverty to the lower middle class and from the lower middle class to the middle class. A number of people in the middle class segment have gone on to become affluent. Currency fluctuations do not and should not concern the Indian government, whose duty is not to look after the economic well being of persons of Indian origin who are now foreign citizens.
Currency fluctuations between countries have their own dynamics, which need not be only economic. There are also a number of political factors that dictate currency levels. Pure economics would dictate that if there are two countries and the GDP of one is consistently higher than The GDP of the other, the currency of the country that has the higher GDP must appreciate against the currency of the other country.
However, India has consciously adopted a policy of major devaluation from time to time in order to make its products cheap internationally and thereby boost its exports. The whole Indian information technology and business process outsourcing boom was based on a policy of consistently devalued currency. A similar policy has been pursued by China, thereby allowing its goods to appear cheap and enabling it to flood the international markets with these cheap goods. The Chinese make their money on huge economies of scale that a disciplined workforce provides.
It is true that real estate prices have zoomed in India. On the average, they have gone up 9 times (900%) in the last 9 years. The real estate market is like any stock or commodity market where you can have booms and recessions, bubbles and their aftermath. We can argue that India’s steadily growing population and a rapidly growing middle class puts tremendous pressure on the demand for real estate. However, India too has had serious recessions in real estate, notably one that lasted from the latter half of 1995 to early 2003, when even prime real estate was difficult to sell.
As for cost of living, it depends entirely upon your knowledge of the local market and choice of what goods and services you want to buy and consume. If you think you can “observe” the local market conditions on a brief visit to India once every 5 or 10 years, you are fooling yourself. India is a much more complex country than that. When Catholics and Protestants have a problem co-existing in Great Britain, it is certainly commendable that Indians have somehow managed to pull together with diverse religions, ethnic groups and geography. India could easily be some 30 nations in one country.
Cheating happens everywhere. India has no monopoly over this. Have you forgotten Enron and WorldCom? Or Bernard Madoff? Or the information technology bubble of 1998-2000? Or the subprime mortgage crisis which ushered in a global financial crisis? Pray, which of these can you blame on India? What do you have to say about the Ivy League MBAs who are produced in needlessly large numbers by the “advanced” countries, whose main occupation appears to be creating a global financial crisis or two every decade or so?
Or let us take Mitt Romney who has pretensions to leading the world’s most powerful nation. I quote from the latest edition of The Economist: “When Mitt Romney was governor of liberal Massachusetts, he supported abortion, gun control, tackling climate change and a requirement that everyone should buy health insurance, backed up with generous subsidies for those who could not afford it. Now, as he prepares to fly to Tampa to accept the Republican Party’s vote for president on August 30th, he opposes all those things. All politicians flip-flop from time to time; but Mr Romney could win an Olympic medal in it.”
I do not see much difference between Mr Romney and the thugs who pass for politicians in India. In fact, I would say Romney is worse. He appears to be a prize-winning hypocrite, despite the trappings of a good background, excellent education and all the advantages that a liberal environment and huge wealth can offer.
As for accommodation in Mexico versus India, I know of any number of discounted holiday packages offered in India which are extremely attractive. There are many travel websites besides various hotels, including five-star hotels offering attractive 3-day 5-day and a week-long package that would include accommodation and food and which should easily fall in the US$ 500 range. All you have to do to find them is use Google.
As for your comments about food, a brief visit to Mangalore cannot make you an expert on economic living or eating here. There is a superb vegetarian restaurant not far from our office called Hotel xxx, where a full vegetarian meal costs Rs 38/-. That’s 70 US cents. Not far from there is another decent hotel with the unlikely name of xxx. A very good Chinese or Indian non-vegetarian ‘thali’ meal (a full meal, mind you) would cost Rs 80/-. That’s US $ 1.45. Most people who come down from abroad, can’t believe these prices.
Just as you have your prejudices against India, I know any number of Indians, including youngsters born and bred abroad, who love to visit India and even stay here for extended periods. Individual attitudes have a lot to do here. Right now in Mangalore, there is a group of about 30 Japanese who have taken up residence to launch an export business. Initially, just four of them came down. Now they have even created a website about Mangalore and share information about the best and most economical places to stay and eat out at.
I also know many Indians who have gone to places like the US and Canada on employment, disliked the environment there and returned to India. I have among our own clients, individuals who own investments and properties in Canada and India and divide their time between the two countries, and are happy for their experiences of both worlds.
All countries have their strong and weak points, their distinctive tastes and traditions. No country is absolutely perfect or imperfect. Neither is any economic, legal or other system or culture. What I find lacking in this world is an inability to focus on the good in a country or its people and attempts to emulate that good, while recognizing and attempting to reduce the bad in our own environment.