Is there a clear relationship between credit growth and market growth?

The fastest growing cities out of 112 top cities of India

 

Growth rates (CAGR)	Market Size Growth Rate	Deposit Growth Rate	Credit Growth Rate
Silvassa	23	14	71
Gandhinagar	22	10	54
Bokaro	19	7	-4
Surat	17	11	18
Thiruvallur	17	11	28
Agartala	16	13	32
Chandigarh	16	13	7
Thanjavur	16	5	20
Kohima	15	9	26
Noida	15	28	43

The slowest growing cities out of 112 top cities of India

 

Growth rates (CAGR)	Market Size Growth Rate	Deposit Growth Rate	Credit Growth Rate
Guntur	8	7	16
Gwalior	8	6	9
Jabalpur	8	3	0
Nellore	8	7	22
Varanasi	8	6	13
Kanpur	7	7	13
Kavaratti	7
Vijayawada	7	7	24
Dhanbad	6	12	15
Kancheepuram	2	16	22

With the exception of Bokaro, and to a certain extent Chandigarh, the 10 fastest growing cities grew on the back of high credit growth. However, this is not a general rule as a look at the slower growing cities reveal. Cities such as Vijaywada, Kancheepuram, Nellore and Guntur did not display a robust growth in spite of high credit growth. Deposit growth, on the other hand is an effect of market growth and in general grows in the wake of market growth. This is generally borne out by the facts, though a few notable exceptions exist – Thanjavur, Kohima, Bokaro (among the fast growing cities) and Dhanbad and Kancheepuram (slow growing cities)

data source: Indicus Analytics

The Double Tragedy of Bihar

It has been some time since the massive floods ravaged Bihar. Already it has disappeared from the front pages and the main media. That the disaster affected over 3 million people is a monumental tragedy. The second tragedy is more insidious – that these people do not matter. That is the reason it has receded from the front pages. The media and the people are merely confirming the facts. The facts are grim – the region affected does not matter on the economic map of the country. That is the second tragedy, one that has insidiously occurred over the last 60 years.

The key affected districts are – Araria, Madhepura, Purnea, Saharsa and Supaul. Some of these regions have had high profile representation in the political space too. These districts are extremely backward and hence agriculture is the mainstay (other sectors are virtually absent). The share of agriculture in the GDP of these districts is 44% (the All India share of agriculture is 19% and in Bihar it is nearly 30%). Other grim facts:

• These districts depend on agriculture but agriculture doesn’t depend so much on them – they account for just 16% of Bihar’s agriculture, which itself is just 5% of India’s agriculture
  
• Of the total GDP of the country, these districts have a share of just 0.3%
  

The total economy of these affected districts is so small that it is fair to say that they just about exist on the economic landscape. This is the bigger tragedy. These guys don't seem to matter.

"Does it take much of a man to see his whole life go down, To look up on the world from a hole in the ground, To wait for your future like a horse that's gone lame, To lie in the gutter and die with no name?

Only a hobo, but one more is gone, Leavin' nobody to sing his sad song, Leavin' nobody to carry him home, Only a hobo, but one more is gone"

Shaken, not stirred - Moribund

Unexpected defeat can shake a person or an organization so badly that hysterical and irrational reactions start appearing. These are expected to subside after a while. What do you say when it shows no sign of abating? Can the organization be said to be completely derailed with little hope of recovery?
The ruling party in India was complacent in 2004. It was so sure of a thunping win that it ordered elections a year ahead of schedule. The media, and its main opposition also seemed to agree. the end result was a shocker. They lost. Then followed a series of hysterical rabble rousing about a foreigner becoming the prime minister.
Over time the party kept shooting itself in the foot. The main leaders were pronounced as past their prime by the ideological backbone and for a while they went on the backfoot..........only to return as the prime ministerial candidates! While the world changed, nothing changed here, including the sulk. The confidence vote was another opportunity to get back into the forefront. This was lost, again very badly - first the centre of gravity shifted away to Mayawati and then the vote itself was lost. One expected more hysterics. But I doubt if anyone would have anticipated that senior people from the party would start linking the bomb blasts to the confidence vote.
Either they have completely lost it, or they believe that people are idiots and anything goes. I am inclined to think that it is the former.

The Long Tail

A very interesting site on the theme of long tail theory
and a very interesting write up by seth godin
Chris Anderson is the man who has been propagating this interesting theory.
and the theory rocks.

An interesting counter theory is published at HBR by Anita Elberse, a Harvard Business School associate professor. It is an interesting article with a powerful conterview

What farmers want

What would I want the most if I were a small farmer with 6-7 acres of land?
My main problem is that what I produce needs to be sold in a market which is some distance away. Having carried the produce, I am in no position to take it back (the costs) and therefore I am forced to sell at whatever price the trading cartel is giving me at that point in time.
What I would like is that I have a warehouse within 10-15 kms of my farm. I go there, get the produce graded and certified and it is then stored. I in turn get a warehouse receipt, which clearly specifies what I delivered. This WR is then tranferable, tradable and a fully negotiable instrument. This implies that I can hold the WR, sell it to someone or pledge it for loan to a bank.
This increases my stock holding capacity. No longer am I at the mercy of a local cartel. I can wait for the prices or cash out.
To enable a farmer to reach the stage described above, the government needs to either build (or incentivize others to build) these warehouses (maybe 25-30,000 across the country), create a system of accredition of produce (grading and storing), make WR negotiable and tranferable.
Apart from targeted investments, this means that companies interested in this sort of a supply chain ought to be encouraged (cash and carry wholesalers and large scale retailers). Markets for trading WR (physically or in demat forms) need to be created and these markets should replace the current practice of markets where the producer has to carry goods.
Can the budget itself do much towards achieving this? It can in terms of allocations for such programs and tax incentives encouraging investments in these areas. However, the budget alone is not enough. A clear policy and implementation over 3-5 years will be required. Do those in power have the will to carry this through?

The Crash of January ‘08

The headlines screamed “Melt down”. Was it really a melt down in India? The market came down from incredible bubble valuations to reasonable valuations. Is this a crash? It seems the media is a spokesperson for idle gamblers who view the markets as a perpetual money-printing machine. To call Monday “Black Monday” and Tuesday “Terrible Tuesday” is irresponsible journalism. And if ignorant adults called “small investors” lost, why should the rational world shed any tears? They were blinded by greed and made incredibly irresponsible punts in the first place.