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India oligarchs?


shalab
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How wealth is concentrated in a few hands most of which is inherited from their parents or grand parents.

 

http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/billionaires-wealth-exceeds-indias-consumption-expenses/articleshow/12197653.cms

so what?  Think Rockefeller, Hilton, Vanderbilt, Ford etc etc. How long did that last?  One gen?  Two gen? Three? 

Remember Warren's article on why not to leave money to children - it is true for India as well.

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Unlike American industrialists, Carnegie, Rockefeller, etc. most billionaires in Russia, India, and China and really even Brazil are not the true rags to riches examples of social mobility that marked the US industrial rise.  Heck the example of Japan's Morita and Toyoda are better examples of true social mobility than anything in the Brics. The reason it matters is principally because all these Brics still lack the entrepreneurial, innovation, and capital allocating aspects of the US system. They do it by diktat, or by cronyism, or by outright theft and corruption. Obviously I'm over generalizing, but these are things that bug me about the Brics.

 

Seshnath ---  you are missing the point.  If Papa Ambani left only a small trust to his sons would either of them be billionaires?

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India companies

 

Tata - started in 1868

Wadia group - started in 1736

Aditya Birla group - started in 1857

 

and the list goes on....

 

Out of question, what do these companies do? To me, irrespective of their industries, it is interesting that they have yet to go belly up. After all, if there is anything that we learn from capitalism, it is that all companies eventually fail...

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India companies

 

Tata - started in 1868

Wadia group - started in 1736

Aditya Birla group - started in 1857

 

and the list goes on....

Out of question, what do these companies do? To me, irrespective of their industries, it is interesting that they have yet to go belly up. After all, if there is anything that we learn from capitalism, it is that all companies eventually fail...

 

Would you describe the economy and class system of India from 1736 to now as a mostly free market capitalist system with absolutely free upward(and downward) mobility based on nothing but merit in the marketplace? Or has it been something entirely different for most of that time period?

 

I think the latter has been the case.  The answer to your question lies in the difference between the two systems, not in any property of free-market capitalism that can be studied there.  Things are changing for the better in India, I wonder if those same companies/families will still dominate the economy in another 50-200 years?  I doubt it.  Some may still be around in some form, there are family owned businesses that have lasted a long time.  Beretta in Italy has been run by the same family since 1526 (485 years).

 

 

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India companies

 

Tata - started in 1868

Wadia group - started in 1736

Aditya Birla group - started in 1857

 

and the list goes on....

 

Out of question, what do these companies do? To me, irrespective of their industries, it is interesting that they have yet to go belly up. After all, if there is anything that we learn from capitalism, it is that all companies eventually fail...

 

They are all conglomerates. Since business was concentrated in a few hands (the British left it to their favorite communities i.e. the Parsis and Marwaris and this continued under Indian Govt because they had policy of License Raj) additional capital generated from businesses was left in these few hands to invest in new businesses. Even today the Indian govt controls a significant part of Indian business.

 

What has been the most successful industry in India over the past decade? - The IT business.

Why? Because the clients are based out of the country (dont need to deal with old-established businesses or the govt as clients), the assets (people and knowledge) aren't allocated by the government and there is plenty of raw material (cheap engineers wanting to make money).

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They do it by diktat, or by cronyism, or by outright theft and corruption. Obviously I'm over generalizing, but these are things that bug me about the Brics.

 

Amen. Putting India in the context of BRIC is key- Indian markets are not open ( in many areas not even as open as China ) and the family run companies continue to influence government policy to favor them and don't think this will change anytime soon.

 

It is a different thing with the people though and it is true of all BRIC countries.

 

If system gives the U.S an advantage, I don't see the U.S getting eclipsed anytime soon as the predominant power.

 

Indian markets are not open?  check your source - we do a lot of FDIs a year, you know. 

 

What is wrong with family run companies?  Our hero buys a lot of family run companies - WaPo, borsheim's, Madam B's etc etc.

 

Can you give me instances of these allegations in India?  In a way, I am glad that you have these perceptions about India - leaves the market and its potential to informed investors like me :-).

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There are scores of companies in india - family owned - which do an excellent job of managing shareholder capital and have created a lot of wealth

 

piramal healthcare - ajay piramal

asian paints - india's largest paint company - a 30% compounder for 10+ yrs

thermax, blue star - cyclical yet wealth creators

IT service companies such as infosys

Lakshmi machine works - Textile machinery

and several more

 

there even govt owned companies you would assume would only destroy wealth, which have done well inspite of the goverment holding (though there is not as much meddling )

 

The usual tendency for most foriegn investors including FII is to look the top 20-30 companies and draw their conclusions, whereas there are over 5000 companies, several of them quite good to choose from

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Indian markets are not open?  check your source - we do a lot of FDIs a year, you know.

 

Where did the FDI go to and how does it compare to other countries? India retail sector is one good example where the old style companies are protected by political parties. ( e.g: Walmart, Starbucks etc. )

 

FDI in retail is in the news for all the wrong reasons - it was not about protecting big family owned companies.  It was all about protecting middle level retailers - they provide a lot of jobs - to employees and to small business owners.  The retail market is very much fragmented in India - an average retailer does about gross 200,000 per month in a B-class town i.e below metro.  The big retailers like Reliance and More are new comers - less than a decade old.  You will find a lot of department stores as well.  Then there are state run and co-operatives as well competing. 

Just because India is slowly opening up at its pace doesn't mean that things are going back to where they were.  Between the tiger and the elephant, the latter will be slow.  I am glad the regulators follow that pace, instead of being pressurized to chase the prevailing fashion.  It has worked well so far (banking sector being one prime example)

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While all the data points to a system that is not open; not even as open as China which is not democratic.

 

 

'Open' is a relative term. Compared to pre-1991 we are plenty open and continuously opening further. We have no choice, we have to open up the economy - we need FDI to support our deficit.

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As a citizen, poor infrastructure and corruption are big issues and impact the quality of life. As an investor , it is a non issue. They are a lot of good companies which have grown well inspite of all the issues, created a lot of wealth for investors and have decent corporate governance.

 

A 15-18% CAGR for 10+ yrs is par for the course and a lot of value investors i know have made that kind of return. I will actually make a claim - A lot of smart investors on this board could actually make 20%+ returns very easily in india.

 

A few sectors such as the oil& gas are a problem. I think the airline sector should be opened ...after the way indian investors have lost money (20+ airlines have gone bankrupt in the last 15 yrs), it would be interesting to watch foriegn investors do the same.

 

 

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You didnot answer your own question...

 

Indian markets are not open?  check your source - we do a lot of FDIs a year, you know

 

While all the data points to a system that is not open; not even as open as China which is not democratic. I gave retail as one example, the other one is airlines and the most recent example is retro-active taxes for companies bought out by foreign owners.

 

Here is an article I found through bing when looking at foreign direct investment in India in retail. Going slow is going to help whom? The people who don't want change and want to maintain the status quo.

 

http://articles.timesofindia.indiatimes.com/2011-11-29/india/30453728_1_retail-sector-small-retailers-global-retail-giants

 

All the data points to a system that is not open?  What are your data points?  I did answer my question - FDI means foreign direct investment.  If a country is not open, would there be FDI?  Check these out.

 

http://dipp.nic.in/English/Policies/Policy.aspx

 

Regarding articles on bing and internet - do you always trust the opinions of whoever you read on internet?

 

Whether we want our door open 180 degrees or less than that is a matter of culture, history and priorities.  Let us talk about the standards for openness - Is US open as it is claimed to be?  If so why was there a big hue and cry about Chinese buying a petroleum company or Middle Easterners buying a Port operating company?  Why was it blocked?  Now that is a door that looks open but is shut right in your face as you walk in.

 

Each nation has its priorities - we manage based on ours.  Investor interests are secondary to interests of voting citizens - that is a reality for a democracy.  Which sector is open and to what extent is a policy decision.  At least, India is clear about it.  The pace at which we go is a matter of judgement - you want to second guess it, be my guest. 

 

And all economic policies by a government by its nature will help someone and harm someone.  If you want to look for problems, I am sure you are going to find it everywhere especially with the bias.  I don't see any issue here - whether we do it this year or next is a matter of judgement.  And nobody has said that we are not going to do it, period.

 

Retro-active tax changes - it is just clarification, really.  Again priorities - we don't care for investors who want to evade a 30% tax by routing transactions through tax havens.  If you are a US company/resident, you can't escape the tax net just because you did a transaction in Mauritius.  Your global income is taxed.

 

Also, think about it - Indian saving rate is much higher than most other countries.  So where do we look for capital - India or outside.  Do we really need people buying s**t they don't need from Walmart or do we push for better infrastructure - you tell me where the priorities should be, if you were managing India Inc.

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