We do not require certificates from the New York Times

Glorifying the speculator

An an incredible story that defies "journalism" but typifies what New York City stands for, the New York Times (May 4th) carried a "front page" website article: "India, Suddenly Starved For Investment".

The article begins with a powerful and colourful opening "Sumit Sapra is a member of that ambitious, impatient generation of young Indians who rode the crest of the global economy. In five years, he changed jobs three times, quadrupling his salary along the way. Even when satisfied with his position, he kept his résumé posted on job sites, in case better offers came along. And he splurged. In three years, he bought three cars, moving up a notch in luxury each time. For weekend jaunts, he bought a motorcycle."

The article then rues the downfall of Mr. Sapra who, "armed with a prestigious degree", has been laid off and now will not have his multiple job offers awaiting him each time he opens his email inbox.

From the decline of this individual's excessive lifestyle, we are taken to the cranes of Gurgaon where, "A few short years ago, construction sites here buzzed 24 hours a day, crews working through the night, cramming down food from onsite trucks during breaks in the twilight. Now real estate sites lie fallow. The once-booming art market has slowed to a crawl. And charmed professionals with coveted degrees, like Sumit Sapra, are unemployed or taking pay cuts to hold on to their jobs".

India needs foreign capital, muses the article, and there was a lot of it around. Now, all those who believed that India was sheltered from the global economy have to eat humble pie. India is crumbling and India desperately needs foreign investment.

To prove this point the article then turns our attention to DLF - the symbol of progress in the blurry eyes of the New York Times. "DLF turned to foreign lenders and investors like D. E. Shaw, the New York-based investment firm, because they provided money "at lower rates of interest and in larger amounts," said Rajeev Talwar, an executive director at New Delhi-based DLF. "Today, you have no choice but to go to the Indian banks."

What cheek!
DLF borrowed money that looked like it was cheap. Any lender in a bull market will happily give you money at low rates of interest because - by virtue of being in a bull market - they know you can repay the money from all the sales of land banks. Any idiot will borrow this "cheap" (or even "expensive") money because they expect to make even more from their business. Particularly when their only business is to take barren land and enrich them into some fantasy "land bank" because of some friendly re-zoning from corrupt partnerships with politicians!

DLF - like Unitech and a host of other developers - are stuck in debt which they cannot repay. Even though they were obtained at "lower rates". "Cheap" has suddenly become "expensive". Because the markets have turned and the "land banks" are now good for letting cows do what cows do best on land: irrigate the soil.

But the real insult comes in the ending "Today, you have no choice but to go to the Indian banks".

The cheek of it all!
The Indian banks were forced to lend money to these robber real estate companies (the RBI data announced a few weeks ago confirms the surge in lending; what these real estate companies have done to consumers confirms their pedigree). The forced lending - egged on by political support - was to ensure that the DLF's of the world would not head from insolvency to bankruptcy.
And here is an Executive Director of DLF - a rescued company - saying almost in desperation, as if he has been asked to bed with the last living woman in the world, "Today, you have no choice but to go to the Indian banks".

If I was the Indian bank, I would ask for my money back.
Like Pronto!
And send DLF off to the haven off crony capitalism - New York City - with hat in hand.

Foreign capital not foreign punters
Sure, as one economist noted, "If India wants to go back to the 8 to 9 percent growth rate, private investment and low cost of capital is essential".

I agree. India needs more private investment and probably more foreign capital.
But it does not need the gunslingers and the gunrunners who barged in to the Great India Party with their short-term, how-much-money-can-I-make-by-tonight attitude. And India does not need companies like DLF who prevent free competition and survive on government largesse.

India does not need to "loosen regulation" to get its animal spirits going, as another economist pointed out. What India needs is to enforce regulation that punishes the crooks. Knowing that there is one law that works for all will allow all the animals to come out - without being scared of the lions, the hyenas, and the loan sharks.

India needs long term capital for sure - including foreign capital - and a more transparent business environment that is not scared to shut down the crony capitalists.

But, yes, India does need rotten stories like the one just carried by the New York Times to remind us what we do not need - an elegy for greed and worship of Mammon.

May New York and London retain their unchallenged crowns as the cities which bred, fed, and bed the crooks. And glorified them. Please leave us, in starving India, to be content with a dispassionately boring economic life. For we have real work to do: building a nation.

Another good article from Ajit Dayal of Equitymaster.
Thus while the whole world was deluged with bad debts, India remained comparatively scam free, thanks to the conservative policy followed by the last Reserve Governor Y V Reddy.
What I do not understand why we should depend upon rating agencies like Moodys and Standard & Poor and Morgan Stanley.
They have made a mess of the own countries finances by giving the failed banks high ratings and they should shamelessly derate the Indian Government Bonds.
What an irony?