Archive for July 15th, 2009

Why India will not become a superpower?

Why India will not become a superpower?

1. Population:

India’s increasing population is a big hindrance in India’s becoming a Super power. Rising population has affected the quality of life of the people for sure as imparting access of basic amenities and education to bigger population becomes more difficult. In the last several decades, fertility control policies in India have failed to promote a sustainable solution to the problem of overpopulation. India needs to take strict measures to counter the prevailing birth rate in the country.

2. Corruption:

India is one of the most corrupt countries on the world map. Corruption in India has assumed such large proportions that public have come to believe that it is impossible to get rid of this malaise.

We need variety of strategies to fight corruption, ranging from the simplification of rules and procedures and the application of information technology to specific steps such as trapping corrupt public servants. Open and transparent political systems are must at all levels.

3. Decline of public institutions:

key institutions like —politics, universities, judiciary, bureaucracy, police etc. are witnessing deterioration on the matter of accountability and productivity. In India, average incomes have risen fourfold and yet public institutions have not improved. Indian policy makers need to come up with number of public institutional reforms steps to counter this malaise.

4. Naxal and Maoist menace :

Extremism in the form of the Naxalite movement has to be checked. Stern and sincere steps should be taken to rein in the menace.

Rehabilitation programme has to be launched to bring the Naxalites into the mainstream and at the same time police force should be given modern training and equipments to counter ultras.

5. Social inequality and Unequal distribution of income across society:

India needs to address growing unequal income distribution and need to narrow the gap between the poor and rich . This disparity has only increased over the years. Economic policy makers need to work on this. The present global financial crisis is bound to make matters worse unless long-term structural reforms are adopted.

6. Environmental degradation:

Economic development without environmental considerations can cause serious environmental damage in turn impairing the quality of life of present and future generations. The degradation is impacting people’s lives in very real ways, whether in the form of massive depletion of underground aquifers, chemical contamination of soil, death of rivers, loss of species etc.

7. Religious extremism :

Current trends shows Religious extremism has risen sharply in Indian society and if not taken care of, they have potential to completely destroy the secular and democratic fabric of the nation.

Religious riots, communal clashes and bombings in every nook and corner of the country are hindrance in the set up of secular fabric, scientific advancements, technological breakthroughs in the country. Matured democracy and vibrant, fast-growing economy like INDIA have to deal with this issue ASAP.

8. Media Apathy :

Indian media has failed to cover all relevant and real issues revolving around our society. Media needs to come up with the coverage of real and main issues like social inequality and environment degradations. Media has to play an active role in spreading awareness among masses towards major issues of the society.

9. Political chaos :

The political fragmentation across central and regional levels makes it very difficult to forge sustainable long term policies in the realm of health, education, infrastructure etc.

10. Border conflicts:

India’s unresolved border disputes, especially in Kashmir and the North East (Nagaland and Manipur) which indicates that there are parts of India that are not comfortable with being part of India. India needs to take proactive steps to resolve the conflict and fasten the development in these disturbed territories.

QIP route set to lose sheen :(

QIP route set to lose sheen

Raising money through the qualified institutional placement (QIP) route is expected to get tougher in coming days as almost 75% of the QIPs made in 2009 have given negative returns with 10 out of 13 of them trading below their offer prices.

With the success of Unitech, which raised a total of Rs 4,400 crore in two tranches in 2009, QIP has become the most favoured instrument for fund raising by corporates. So far in the calendar year 2009, 13 companies mobilised Rs 12,500 crore through the QIP route.

In view of the current down trend in the equity market where majority of the QIPs made have seen significant erosion in value, experts argue that raising funds through this route would either slow down or get delayed.

A study by Crisil Equities shows that total return on investments by all the QIPs is marginally negative despite significant gains registered from the first QIP of Unitech, which has delivered a positive return of around 75%. The study reveals that around one fourth of the QIPs are trading 20% below their offer prices.

In absolute terms, Unitech’s second tranche of QIP of Rs 2789 crore at an offer price of Rs 81 has lost over Rs 450 crore. However, Unitech’s first QIP of Rs 1,620 crore in April 2009 at an offer price of Rs 38.5 is the largest wealth creator for QIPs with total gains of Rs 1220 crore.

Going forward, another 23 companies have lined up to raise Rs 43,887 crore through the QIP route. Of this, GMR Infrastructure has already withdrawn its QIP of Rs 5,000 crore owing to poor investor response.

Citing the example of GMR Infrastructure, Jagannadham Thunuguntla, head of equity, SMC Capital Ltd, said: “Only good companies with reasonable valuations will be able to successfully complete their QIP process. Whatever valuations the companies are offering to potential investors should also be justified by their fundamentals”.

However, experts also argue that the significant fall in the prices of QIPs is also on account of profit taking by qualified institutional buyers (QIB).

“Since there is no lock-in period for investment in QIPs, most of the institutional investors have sold heavily after subscribing to the QIPs making hefty profits”, said a senior executive at a leading institutional broking firm.

Unitech, through its two QIP issues, raised around Rs 4,400 crore, accounting for 35% of the total QIP amount. Among sectors, the real estate, with five companies, has raised a total of Rs 9,500 crore, 76% of the total QIP amount.