The Market Growth story and India Growth story
By: Amit Bhushan Date: 9th Feb. 2015
The 'pink press' in particular and commercial news media in general, generally tends to inter-link capital market growth story intricately with India growth story for public consumption. This is even as we 'know' that less than 2 % of our people are invested in stock market and our organized sector is barely 40-45% of the total economy size of our real economy and that too is not fully represented on our capital markets. The contribution in terms of total workforce is less than 10-15% of the total workforce. It is the banking sector which has the bandwidth to meet the credit supply needs of possibly 'all' sectors rather than capital markets however it still maintains a healthy bias towards the government sector and the organized sector in comparison to other kind of set ups possibly due to conservative nature of business. While some of this interlinking between various markets may be just passable since we need capital inflows, however that capital markets is just one of the sources on which our dependency is high and so is our risk, is not highlighted adequately alongside options to grow other capital inflows that we may exercise include new structures, if possible.
So the question in India is essentially about creating structures and incentives for businesses to move to organized and structured operations through laws and business rules that are supportive and ensuring that banks have a variety of choices for credit rationing 'across sectors' whereby 'businesses' essentially do not feel left out. We need some dedicated efforts to help new businesses to grow and develop upon in a competitive environment with special exit schemes for small sized business which may not be ripe candidates for mergers & acquisitions or restructuring, though. It would also help if we simultaneously evolve our consumer protection, minimum as well premium quality standards and legal contract standards (alongside possibly a standard fulfillment checklist) for such sectors so that businesses can operate in more predictable environments rather than a brinksmanship, which seem to be the basis of operations as of today. It is essentially that after defining operating standards (for external customers or stakeholders like labour/community/environment etc.) that financial disclosure standards then can be defined and properly evaluated. The standards may be different for different size/s or organizations basis turnover, capital or number of people etc., for different organization structures like for profit may have higher/different standards than for a not-for-profit or co-operative organizations in the same segment etc. the organization structures can be created with different objectives rather than by government dictates and the government can have an industry sector regulator to liaison and evolve business rules and legislation support.
However continued dithering by our legislators in deference to business interests represented by them, we have continued with piecemeal approach for legislative solutions which has in turn complicated the situation and party/political leaders in power are unable to balance interests. With commercial media chipping in by the side of lobbies instead of representing public interest which is the case much more often than the exception where people interests being well represented and argued for in media, the confusion actually becomes much more accentuated, yet very little legislator activity is witnessed on this front while we continue to find them engaged in personality matches and this is common across political parties irrespective of which hue and colour are they from. While pundits seem to believe that this is likely to take the wind out of the sails of the current regime due to political messaging on an eventual loss, however they seem to miss the point that the emerging winner set up has essentially supported or made extra efforts to identify as 'bania' even while taking a strict stance against crony capitalism. I do not think that the ruling dispensation making herculean effort to re-model leadership in a state was sending different message, however it's the people who probably preferred a more original and better structured approach for the same that is likely to result in the poll outcomes. And India is essentially a large size untapped market where playing by the rules as well can be a big business opportunity. This may be a divergence for the capital markets which essentially tend to reward/focus on businesses that play by rules tilted in their favour, however newer entrants tend to benefit from clearly defined rules and predictability of outcomes whereby they innovate better and more efficient processes for fulfillment. This may actually be a good omen for India growth story, though capital market growth story may not capture the same in the short run.
By: Amit Bhushan Date: 9th Feb. 2015
The 'pink press' in particular and commercial news media in general, generally tends to inter-link capital market growth story intricately with India growth story for public consumption. This is even as we 'know' that less than 2 % of our people are invested in stock market and our organized sector is barely 40-45% of the total economy size of our real economy and that too is not fully represented on our capital markets. The contribution in terms of total workforce is less than 10-15% of the total workforce. It is the banking sector which has the bandwidth to meet the credit supply needs of possibly 'all' sectors rather than capital markets however it still maintains a healthy bias towards the government sector and the organized sector in comparison to other kind of set ups possibly due to conservative nature of business. While some of this interlinking between various markets may be just passable since we need capital inflows, however that capital markets is just one of the sources on which our dependency is high and so is our risk, is not highlighted adequately alongside options to grow other capital inflows that we may exercise include new structures, if possible.
So the question in India is essentially about creating structures and incentives for businesses to move to organized and structured operations through laws and business rules that are supportive and ensuring that banks have a variety of choices for credit rationing 'across sectors' whereby 'businesses' essentially do not feel left out. We need some dedicated efforts to help new businesses to grow and develop upon in a competitive environment with special exit schemes for small sized business which may not be ripe candidates for mergers & acquisitions or restructuring, though. It would also help if we simultaneously evolve our consumer protection, minimum as well premium quality standards and legal contract standards (alongside possibly a standard fulfillment checklist) for such sectors so that businesses can operate in more predictable environments rather than a brinksmanship, which seem to be the basis of operations as of today. It is essentially that after defining operating standards (for external customers or stakeholders like labour/community/environment etc.) that financial disclosure standards then can be defined and properly evaluated. The standards may be different for different size/s or organizations basis turnover, capital or number of people etc., for different organization structures like for profit may have higher/different standards than for a not-for-profit or co-operative organizations in the same segment etc. the organization structures can be created with different objectives rather than by government dictates and the government can have an industry sector regulator to liaison and evolve business rules and legislation support.
However continued dithering by our legislators in deference to business interests represented by them, we have continued with piecemeal approach for legislative solutions which has in turn complicated the situation and party/political leaders in power are unable to balance interests. With commercial media chipping in by the side of lobbies instead of representing public interest which is the case much more often than the exception where people interests being well represented and argued for in media, the confusion actually becomes much more accentuated, yet very little legislator activity is witnessed on this front while we continue to find them engaged in personality matches and this is common across political parties irrespective of which hue and colour are they from. While pundits seem to believe that this is likely to take the wind out of the sails of the current regime due to political messaging on an eventual loss, however they seem to miss the point that the emerging winner set up has essentially supported or made extra efforts to identify as 'bania' even while taking a strict stance against crony capitalism. I do not think that the ruling dispensation making herculean effort to re-model leadership in a state was sending different message, however it's the people who probably preferred a more original and better structured approach for the same that is likely to result in the poll outcomes. And India is essentially a large size untapped market where playing by the rules as well can be a big business opportunity. This may be a divergence for the capital markets which essentially tend to reward/focus on businesses that play by rules tilted in their favour, however newer entrants tend to benefit from clearly defined rules and predictability of outcomes whereby they innovate better and more efficient processes for fulfillment. This may actually be a good omen for India growth story, though capital market growth story may not capture the same in the short run.