How Fractured Politics Can Harm India’s Finances

As India’s politicians gear up for a general election, competitive populism is the only game in town. The ruling Congress party, which must seek a new electoral mandate within 15 months, has played a high-value card early, announcing a $15bn loan waiver for small farmers. The centerpiece of next year’s budget, the write-off is a present to a key voter group, the 40m farmers who are in default on loans taken out with state-owned banks and other institutional lenders. The scheme will cost the equivalent of 1.2 per cent of gross domestic product and will be implemented by the end of June, giving the government the option of an early election in the autumn.

The waiver will, in the short-term, boost rural incomes at a politically expedient time. Addressing villagers at a rally the day after the budget,  the Congress party president, hailed the scheme as a “revolutionary step”. For the moment, the banks are not complaining: they stand to be compensated for loans that had already gone bad. In the medium term, however, the write-off could retard efforts to scale up access to finance for the rural poor, 70 per cent of whom lack a bank account and 87 per cent of whom have no access to credit from a formal source, according to a recent survey by the World Bank and National Council for Applied Economic Research. Further read here

At 28, A Paraplegic, She Makes Her Living From The Stock Markets(Inspiring Read Here)

Sujata Burla’s life took an ugly turn on June 9, 2001. On a pilgrimage to Shirdi, where the Sai Baba temple in Maharashtra is located, from Hyderabad, she met with an accident. Four months later, the doctors and physiotherapists treating her told her she could not walk for the rest of her life. The accident had turned her into a paraplegic. It meant Sujata was immobile below the shoulders. She was just 21.

Soon people who she thought were her friends abandoned her and Sujata was left alone. Compounding her tragedy was her father’s death in March 2004. Not one to be easily cowed down by her circumstances, she started learning about the stock markets that year.

Now she trades like a pro and earns anywhere between Rs 200,000 and Rs 250,000 every month. On a day like Wednesday, September 19, 2007, when the Nifty was up 186 points, Sujata made a cool Rs 600,000 in a single day. She has still not sold her position. (inspiring read here)

Asian Crisis vs Subprime Crisis …

I happen to read Lucky Tan’s blogpost few minutes back regarding Sub prime mess in US and its effect on Asian markets. It had a great thoughts.

It looks like a simple question to answer : How long and how serious is the US recession? But if you have been watching CNBC, you will realise that the views on where the US economy is headed are diverse. You can find economists who believe the US will avoid a recession and economists who think that this is the worst recession since the Great Depression. After hearing many contradictory views from economists with Phds, you start to think of them as highly paid fortune tellers…..

Two crisis 10 years apart on opposite sides of the Pacific Ocean. While you sitting comfortably in your HDB flat whining about those price increases, several million Americans are on the verge of losing their homes and many are losing their jobs. Their currency is getting walloped and banks are in trouble. About 10 years ago, Asians faced a similar situation during the Asian crisis. I went through it and it was a terrifying but unforgetable experience. Read post ahead here