Rural India Growing

The rural India no longer needs to migrate to the cities to gain employment. New sectors like telecom, microfinance, rural BPOs, etc. are providing them with lucrative opportunities in their own home towns. In earlier days big cities like Delhi and Mumbai were the hot destinations for the youths of the rural world, especially for the educated ones. However, very few of them did well. Higher cost of living ate into their incomes leading to lower standards of living and almost negligible savings.

With the new wave of rural BPOs and micro financing, companies in these sectors are now actively seeking people in the smaller towns. Even telecom companies are providing opportunities to the rural community in the form of managing and maintaining their numerous telecom towers. If this continues, then soon the migration from rural to urban India would stop. And the economic divide between the two would start to even out.

India is Growing... (in Corruption Index)

The past few days have not been good for a firm believer in the India growth story. Three instances of large scale corruption have come to light and that too, at about the same time. Already, Transparency International, the international watchdog for corruption has downgraded India in its corruption rankings. And going by the turn of events, it will not be surprising to see India slip further. However, are the country's politicians doing something about it?

Very little we believe! Their hands seemed to be tied by political compulsions. And in cases where they have taken action, the punishment has not been very severe to say the least. On the contrary, the ruling party is hell bent on undertaking a massive expansion in the welfare program, an activity that is notorious for its corruption levels.

India Inc. on the other hand seems to be emboldened by the recent admission by Ratan Tata that his conscience didn't allow him to bribe a minister in order to enter an industry. Others too have come out in the open and have admitted that corruption is indeed a part of the cost structure of doing business. As most of them point out and also does the Wall Street Journal, the creation of a truly independent and empowered anti-corruption agency may help stem the rot. But what remains to be seen is whether there will be any inclination at all towards establishing the same.

'High' and 'Assured' Returns!

It is fundamentally impossible for investments that offer very high upsides to have assured returns. However, this proposal is often used to lure unsuspecting investors. And ignorant investors fall prey to such shallow promises.

The latest testimony to this is the fate of the assured return schemes offered by India's largest insurance company LIC back in the 1980s and 90s. As per reports the extent of losses in three schemes offered by LIC has the potential to bring back memories of the UTI scam of 2001. Promising fixed returns of around 11 to 12%, these plans are currently running a deficit of Rs 140 bn! The invested money is from 1.3 m investors. Hence, there is little doubt that the insurer's inability to deliver returns could dislodge investor confidence once again.

Agreed that the notional losses could be attributed to trends in economy, interest rates, inflation and the like. Further, the outcome may not be as detrimental. This is because LIC seems to have enough liquidity at its disposal to tide over the crisis. But the economic factors are bound to have an impact on investments. And in no way can issuers of the instruments or investors undermine them. Hence it is most imperative for investors to recognize and be warned of the risks to the promised returns.

Investments in stocks at attractive valuations or in mutual funds through the SIP route can offer you some degree of safety. It could also enhance the likelihood of generating supernormal returns in the long run. However, there can never be any 'certainty' to the returns. And thus the promises to deliver assured returns need to be taken with a pinch of salt.