Should India be proud of its billionaires?

When it comes to number of billionaires, India holds its own in the global arena. Indeed, in 2000, no Indian figured on the list of the world's top 100 billionaires. But by 2011, there were 7 billionaires in that elite club. Only the US, Russia and Germany had more of their billionaires in that top 100 billionaires' list than India.

What this highlights is the strength of India's economic rise. Or does it? Although those aspiring to be rich would like to think that it is healthy capitalism that has contributed to this meteoric rise, it may very well not be the case. Infact, the manner in which these people have made it to the top actually reveals a troublesome trend. At least that is what Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, believes.

For instance, one of India's strengths has been the rise of technology entrepreneurs who have played an instrumental role in putting India on the global map. But this trend is gradually paving way for provincial tycoons who have cut deals with state governments to corner the market in industries like mining and real estate. In other words, rather than capitalist principles, it is government patronage which is the ticket to the billionaires club, a trend which does not bode well for the larger interest of the Indian economy.

There is also the matter of wealth concentration to consider. India's 48 billionaires account for a collective networth of US$ 195 bn. This is a little more than a tenth of India's economy. China fares better on this front. Its number of billionaires is more at 95, but collectively they account for less than 3% of the country's economy. How much churn there is in the billionaires list is also a factor worth noting. In the last 7 years at least, nearly the same people have found a place on the list with hardly any headroom for new entrants. In China, the turnover of billionaires comparatively is on the higher side.

It goes without saying that the government aiming for 9% plus growth on a sustained basis going forward is all very fine. But the impact of this has to be felt across sections of society. Growth in the Indian economy has to translate into improved standard of living for all. Otherwise, growing inequality will only sow the seeds for future unrest. History is a testimony to this fact.

India 5th most attractive emerging retail market

                                                                    Source: A T Kearney

India may be losing favour with the international investor community. But if today's chart of the day is any indication, it is certainly not as bleak as it sounds. As the chart highlights, India has emerged as the fifth most attractive emerging market for retail investment. Although it has slipped one place in the rankings as compared to 2011, it is still an encouraging sign for an economy looking to shore up its image. Also interesting to note is that the BRIC group of nations still continue to tempt retailers and are showing no signs of slowing down.

What causes hyperinflation?

Inflation has been gradually creeping around the world due to a variety of reasons. These range from loose government monetary policies to supply bottlenecks creating shortages. But what about hyperinflation? When does inflation get out of control and become hyperinflation? Hyperinflation is defined as an inflation rate of 50% or more in a single month. What differentiates it from inflation is the root cause. Hyperinflation is solely caused by excessive money supply. Debts and deficits reach unsustainable levels. And governments resort to cover expenses through more and more money printing. The value of the currency falls and people lose confidence in the currency. And for a currency to carry weight as well as purchasing power, confidence of people in it is the key.

The hyperinflation in Germany is a classic case in point. From January 1919 until November 1923, the average price level increased by a factor of 20 bn, doubling every 28 hours. The more troubling fact is that hyperinflation is not necessarily a rare event. Since Germany, there have been 29 additional hyperinflations around the world. This is where gold comes in. When confidence in a currency is lost, there is a scramble for hard assets having value. Gold fits the bill nicely. For instance, during the German hyperinflation, an ounce of gold traded for 170 marks in January 1919. That same ounce was worth 87 trillion marks by November 1923. Thus, it goes without saying that gold is a big hedge against inflation. And one must accumulate more of it in today's environment where governments in the developed world are resorting to excessive money printing.

Air India wants to go public for a shocking reason!

Why do companies get listed on stock exchanges? Generally, the purpose for raising money is to fund future expansion plans and to create liquidity by facilitating trading in the share market.

But what if a company issues an initial public offering (IPO) just so that it can facilitate employee stock options for its employees? And what if that company is none other than debt-ridden loss-making public sector firm Air India?

So far the government has been supporting this ailing national carrier with tax payers' money. But if the recommendations of the pay parity report, also known as Dharmadhikari report, are implemented Air India could soon be listed on the stock exchanges. The report recommends listing of the state-owned firm so as to facilitate employee stock options. That too, as part of voluntary retirement scheme (VRS) for probably 7,000 of its 'voluntary retirees'.

In theory, this novel idea may seem to be a quick fix to Air India's ongoing financial constraints. But can the government allure investors to buy shares of Air India? For one, the sentiments in the IPO market are not too encouraging. Secondly, investors have already burned their fingers on other aviation stocks. And given Air India's abysmal financial health, inefficient operations and excessive government interference, the chances of a successful IPO are very bleak.

The reason why Bangalore is India's leading realty market

Property markets across India have tumbled in recent times. In the last quarter itself, Mumbai and National Capital Region (NCR) saw a drop in volumes by 58% and 57% respectively. However, one city has been an exception in the current turmoil. It's Bangalore. The city registered a volume drop of just 18% in the last quarter. Moreover, it also absorbed 49 million sq ft of residential space in the last year. This is highest by any city in India. Apart from this, it also registered highest absorption rate when it came to commercial real estate market.

So, what has been the reason for this outperformance? Presence across all price points is one of the reasons. For instance, in Bangalore one can buy a property ranging from Rs 20 lakhs to Rs 1 crore with ease. Stability in prices is another reason. It may be noted that during the bull run, prices in Mumbai and NCR went through the roof. But in Bangalore, the rise was gradual. Calibrated price increases resulted in high affordability. Also, it may be noted that Bangalore is an IT hub. Thus, the demand for commercial space is likely to remain buoyant there as compared to other cities. However, the situation might change soon as many pending project approvals in Mumbai have been recently given a green signal by the local municipal authority.  

This is the best commodity bet in emerging markets like India

So what do you think is the best commodity bet in the emerging markets in recent times? If you think it is gold or even oil, think again. It seems that opportunity lies in palm oil. Let us look at the demand side first. Emerging markets have grown at a stupendous rate in the past few years. With this, incomes have also swelled. This in turn has fuelled the demand for food rich in calories and saturated fats. This is where palm oil comes in. In fact, global demand for palm oil has risen by a CAGR of 7% for the past 10 years. Prices have tripled.

Further, palm oil is more than 10 times more efficient per acre than soybean oil and 7 to 8 times more efficient than rapeseed oil. Every acre of palm planted yields nearly 11 times the volume of soybean oil and 7 times the rapeseed oil. Total land under cultivation is somewhere around 15 m hectares. This is less than 2% of that which is dedicated to soybean production. On the supply front, Indonesia and Malaysia produce 87% of the world's palm oil followed by Thailand and Nigeria. Countries such as Kenya and Brazil are also ramping up production. Thus, in a world where there are still millions to be fed, palm oil could be one commodity that could achieve this simply because it yields more energy per acre. And hence, this is a commodity that should be on everyone's radar.

Which foreigners are buying US homes?

                                                   Data Source: The Economist

The US housing market has been down in the dumps ever since the global financial crisis escalated in 2008. However, US homes have not lost their flavour for foreign buyers. As today's chart of the day shows, buyers in Canada and China accounted for a larger chunk of home sales to foreigners in FY12. For both the countries, this was a rise from homes sold in FY07. Both benefited from strong increases in the purchasing power of their currencies over this period. For those, whose currencies depreciated against the dollar, the scenario was the reverse as was the case with Britain. India's position remained unchanged despite the rupee depreciating significantly against the dollar.