I have one word to say after completing my trip to India (the first after completing my business school) - "irrational exuberance".
I saw irrational exuberance all over the place. I saw it in real estate. A view of Hyderabad area from the air exemplifies it. All you see from the flight when you are landing in Begumpet airport is squares and squares of land. Every empty piece of land you can see is fortified with walls of bricks around the plot to fend off people forcefully claiming the land. My native place, a village in south India is well known for its rice produce, farming has been the occupation of 99% of the people in that area for generations. Now, farming land (err ... real estate) is being treated like a stock market. Land which has been in one hand (the farmer) for decades has changed more than half a dozen hands in the last 2 years. You visit any land in the place and you will be swarmed with real estate brokers all over you !. Here's one more - The AP government announced some land in Anantapur district as a SEZ (Special Economic Zone) and the land basically is acres and acres of desert with no water or infrastructure. The next day, you can see dozens of Sumos and Innovas (the latest Toyota van which you can see all over the place now) filled with real estate brokers trying to buy the land at exorbitant prices.
There is irrational exuberance in the stock market. My brother owns a small stock brokerage (the only one for about 50 villages around), It was dumbstruck to see people who are farmers, probably have stopped their studies at 10th grade (I have known some of them for years) talk about puts and calls. No wonder, the BSE has been going up like crazy, almost 5 times up since July 03.
I saw irrational exuberance in the students there. One of my friends in Tirupati (the town that I live, probably the second tier city in my state) was trying to recruit students with ASP and flash knowledge from about a dozen local MCA (Master of Computer Applications) schools and he would not get a response when he posted 10K rs salary per month. I visited IIT Bombay's research wing for half a day, talking to professors and students. Granted the graduate students there are from second tier schools in India but the research going on there is sub par to the second tier schools in US.
The power cuts have gone worse. I never saw power cuts in the month of December and January in AP, I experienced power cuts for at least couple of hours a day in Visakapatnam and Tirupati. The roads have gotten much better though.
My gut feeling is that India is going towards a hard landing. Granted, I visited there for one month and I visited only couple of states. Granted I am not following all the major economic indicators in India and the underlying currents. Personally, I am scared to death to invest any money in India now. Personally, I am scared that India will remain a BPO center and will fall apart like a pack of cards if something happens to the foreign capital inflow.
Subscribe to:
Post Comments (Atom)
2 comments:
Pat,
Nice attempt at the state of Indian economy and the supposed development that's taking place there. Looks like you had one interesting and eventful trip. In the end, did you had fun?
I agree with you on the irrational development part. Real Estate is a very good example to desscribe the things. I assume you were comparing with US intuitively in your musings. Also, When you said, India might remain the back office of the world and might fail to take the next step to become the product/Technical development hub, I sadly have to agree with you, until I see something different. The change is coming in the last few years, but its been very slow, not sure if thats enough to take-off in the near future.
Here is my view on Investing in India. Indians love to live an unorganized life, or atleast they are forced to do so. There is chaos everywhere. But among all this confusion, also exists a great scope for development, albeit in a different way when compared with US.
If we compare US and India all the time and want India to function the way US does, we are in no look. Its never going to happen. That being said, India does have a lot of potential for development, lucrative business opportunities in its own way. That is a definite given. And, come the right opportunity, I wouldn't, for a moment, hegitate investing in India. For example, have you heard about 'Subhiksha', the new supermarket chain coming up all over India, started by an IIM Alumni. There is a great potential for new business avenues which are yet to be explored to the full extent in India.
I am very optimistic about the Indian state of affairs, and hopefully, it'll prove to be correct in the long run.
Govardhan,
Good investing requires not only the business to be right but the price paid to be right. Whether or not Subiksha is a right business requires some analysis but definetely this is not a right time to start one like it, you would be killed buying the real estate (the same goes even if you try to franchise it, the franchisee has to cover the interest rate of the cost of realestate bought for the purpose). On the samelines, I liked the risk-return ratio of dairy business in India but the turn off factor is the price of the real estate to buy the land for the farm.
For an investor, the price to be paid seem to way off now.
Post a Comment