The Great Convergence: Can India Make It? - Aditya Birla Money

44 Pages·2014·2.43 MB·English

Editorial
“We are experiencing not only a great convergence in
material well being, but also in our values and aspirations”.
One of the best lectures in the last few years, hope you will
enjoy going through it
We may not be aware of it. But many things are changing for the better. Something
important and which has been expected for quite some time is the one relating
to the creation of a public debt management office of the Government of India.
Presently, the RBI runs the Public Debt Office which actually manages the
operational aspects of the issue and servicing of government debt. As you may
be aware the most powerful transformation that we saw in the domestic markets
was the introduction of market determined yields on government securities’
auctions through a process of competitive bidding. This emerged from the first
round of reforms that the domestic economy and markets had gone through in
the very first phase of economic reforms and liberalisation. Both the Urjit Patel
Committee and the Interim Budget have made a mention of the likely birth of the
new institution, that is, an independent Public Debt Management Office of the
Government of India, very soon. This is likely to bring about major changes in the
way we formulate policies in the monetary space, as policies would be free now
of the delicate awareness of what those policies would mean for government’s
borrowing programme. This may also present new opportunities for market
participants including brokers and wealth management companies.
The Exim Bank Commencement Day Lecture was on “The Great Convergence,
Can India Make it?” by Prof. Kishore Mahbubani. Prof. Mahbubani has an entirely
different world view and that too a realistically optimistic one. He says about his
work, The Great Convergence, “is one that runs against the current zeitgeist of
pessimism in the world today. This Is a golden era in human development, even
compared to the state of the world just a few decades ago”. He believes that “we
are experiencing not only a great convergence in material well being, but also in
our values and aspirations”. One of the best lectures in the last few years, hope you
will enjoy going through it.
In the current issue we have two very informative articles, one on online investing
and another one on goal based investing. These are themes relevant to investors
at all times especially if they are at the starting point of their investment cycle.
We close the issue with a beautiful write up on the many beautiful things in
Bhandardara, a location so blessed by nature with its very unique beauty and
tranquility. It will be a good idea to visit the place once before the footfalls rise
beyond the capacity of its tiny roads.

Happy Investing.
Joseph Thomas
FEBRUARY 2014 Investime 03
CONTENTS
06
06 The Great Convergence: Can India Make It?
The Great Convergence, is one that runs against the
current zeitgeist of pessimism in the world today. This
is a golden era in human development, even compared
to the state of the world just a few decades ago
10 Now just go click click and invest online
10
in minutes
As the world advanced, so did technology! While the
digital revolution took the banks and retail stores
online, people realised the convenience of taking their
everyday chores online (from shopping to managing
bank accounts and the likes)
12
12 Planning your Life Stage Milestones
As we move ahead in life our goals, dreams and
aspirations keep changing. The question that arises is:
have we made enough provisions to achieve
these goals?
36 Interim Budget for 2014-15 Key Highlights
India’s economy, in terms of the size of its GDP, is
the 11th largest in the world. We therefore owe a
responsibility not only to ourselves, but to the whole
world, to keep our economy in robust health
36
38 The Last Page
Bhandardara: In the foothills of Sahyadri
Ranges, Team outings have always been an
integral part of corporate life and have gone
a long way in fostering unity and mutual
understanding amongst all
38
Cover Page
Printed, published and edited by Mr. K. Joseph Thomas on behalf of Aditya Birla Money
Mart Limited. (Formally known as Birla Sun Life Distribution Company Limited).
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Tel no: 91-22-4356 8300 Fax no: 91-22-4356 8310 and printed at Spenta Multimedia,
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the future? DISCLAIMER CLAUSE
The information published is as per the data provided by various Mutual Funds. While
utmost care has been taken to maintain accuracy in the data, the company does not
hold any responsibility for errors in the same. The views/opinions expressed in the
various articles are that of the author and the company may not subscribe to the
same either in part or in full. Any person investing on the basis of the data published
in Investime will be doing so at their own risk.

Feature
The Great Convergence, is one that runs against the
current zeitgeist of pessimism in the world today. This is a
golden era in human development, even compared to the
state of the world just a few decades ago
By Prof. Kishore Mahbubani

THE GREAT CONVERGENCE:
Can India Make It?
L
adies and gentlemen, it is a great states involved in civil war will decline history, which has had and will continue
honor to address you this evening. from 15 per cent in 2009 to 7 per cent to have enormous ramifications for our
Let me begin my remarks by in 2050. If you are interested in this, world. Again, however, this massive
emphasising that, unlike many of my Steven Pinker’s book The Better Angels transformation has not been taking
esteemed predecessors at this lecture, of Our Nature presents a comprehensive, place as quickly in India. As of 2010,
I am not a professional economist. My rigorously researched case for the overall India’s middle class numbered 69.17
expertise is in internationalrelations and historical decline of violence in our world. million people, or less than 6 per cent
geopolitics, two areas which are deeply Similarly, absolute global poverty of the total population. By contrast, the
impacted by trade and economics. The is also waning. The halving of global size of China’s middle class is currently
same applies vice versa. Hence, I hope poverty is one of the few Millennium estimated to be more than 300 million,
to speak to you today about how the Development Goals (MDGs) that will be or about the size of the entire population
interplay between today’s geopolitical met on time. In fact, it was accomplished of the United States.
and economic conditions have led to in 2010, five years ahead of schedule. These trends are rapidly closing the
what I call the “great convergence — a The US National Intelligence Council gap between the West and the rest,
concept Irecently wrote a book about. I also predicts that global poverty will reversing what Samuel Huntington called
will also discuss how India is positioned be virtually eliminated by 2030. This the “great divergence,” when the West
in this great convergence. My lecture this dramatic reduction in poverty has surged ahead of Asian countries with
evening will comprise three parts: I will yielded immediate and tangible results. the Industrial Revolution. But, we are not
first attempt to concisely descri Global infant mortality rates have only experiencing a great convergence
be the great convergence. Then, I drastically declined from 63 deaths per in material well-being, but also in our
will discuss why I believe it is taking 1,000 live births in 1990 to 35 deaths values and aspirations.All around the
place now, and to conclude, I will per 1,000 births in 2012. Unfortunately, world, people want essentially the same
talk about India’s opportunities in India’s record has not matched global things: to rise to a middle class standard
the great convergence. performance. India’s poverty rate has of living or above, for their children to
My book, The Great Convergence, only been reduced by 36.3 per cent as of be educated, and to live without threat
is one that runs against the current 2010, and the World Bank projects that of violence conflict. This has created a
zeitgeist of pessimism in the world India will be a few years late in halving it. greater sense of understanding among
today. This is a golden era in human India’s infant mortality rate is likewise peoples of different cultures and even
development, even compared to the much higher than the global average, civilisations. This is what the great
state of the world just a few decades with 43.8 deaths per 1,000 live births. convergence is all about. I specifically
ago. This assertion has generated a lot of Let me now give you a statistic that suggest in my book that humanity
controversy but the data backs it up. Far will be the most important thing to is converging around, what I call, a
less people are dying in interstate wars take away from this lecture: in 2010, “consensual cluster of norms.” These
today, compared to any period in human there were 850 million people in the are: modern science, logic, free market
history. In the 1950s, there was an global middle class. By 2020, the middle economics, the social contract and
average of six interstate wars per year; in class will number 3.2 billion and 4.9 multilateralism.
the first decade of the new millennium, billion by 2030. In Asia alone, the middle I don’t think I need to remind you
the average per year has declined to class is expected to triple from 500 that India is excelling in modern science.
just one.The average number of battle million in 2010 to 1.75 billion by 2020, Indian students earned 24,800 science
deaths per conflict in the post-Cold War accounting for 85 per cent of global and engineering degrees in the United
period is 76 per cent lower than during growth. Half of the global middle class States between 1989 and 2009, the
the Cold War. In terms of internal armed will be Asian in 2020, and almost two second largest number awarded to
conflict, the Peace Research Institute thirds in 2030.This is an extraordinary foreign students. India also outranks
in Oslo projects that the proportion of development unprecedented in human the United States, Japan and China in
06 Investime FEBRUARY 2014
the number of science and engineering Though tensions were running high on Mao Zedong, Park Chung-hee or Joseph
graduates it produces each year, with either side, leaders of both sides were Stalin.The swelling ranks of the educated
690,000 maths and science students very calm and pragmatic middle class demand more of a voice
graduating in India every year. India has in their efforts to defuse the situation. In their governments now, and want to
Saraju Rath, “Scientific instruments Far too much is riding on the partake in the policy process instead
in pre-modern India and the global China-1ndia relationship to risk an of simply reaping or tolerating policy
circulation of knowledge,” lnternational outbreak in violence. Bilateral trade in results. More and more societies and
Institute for Asian Studies newsletter 2013 was valued at $65.47 billion and governments are accepting the rules of
(2008).(http://www.iias.nVsites/default/ there Is a rising number of issues in the social contract. We saw this in the
flles/IIAS_NLS6_32.pdf.), the second which both countries have common Arab spring protests in the Middle East
largest pool of scientists and engineers, interests, such as the situation in and North Africa two years ago, and
and the second largest number of Afghanistan, International terrorism and we see it in less dramatic cases, like
trained doctors in the world. climate change. the growing role of opposition parties
Steven Pinker’s book, The Better The third norm is free market even in Malaysia and Singapore where
Angels of Our Nature, which I economics. The end of the Cold War may the ruling parties have been in power
mentioned earller, suggests that not have seen the end of history, but it since independence. The election of the
the decline of violence can be partly symbolised the triumph of free markets Aam Admi Party into power in the Delhi
attributed to what he calls the “escalator over planned economies. Now, with the legislative assembly elections last year
of reason,” which takes us away from exception of North Korea, no country perfectly demonstrates the strong new
violent impulses due to an ability to in the world denies that free markets demands for more open and transparent
empathise and identify with people, promote growth and development. The governance. Even in China, a one-party
even from other countries and cultures. Indian economy got a huge much-needed state, the new leadership is taking
The world wide web has done much to boost after the liberalising reforms deliberate steps to reform its image
facilitate this. When Chilean miners that the Narasimha Rao government in the eyes of the public. For instance,
were trapped underground for 69 days in implemented following the 1991 President XiJinping has banned lavish
2010, an astounding one billion viewers economic crisis. In 1992, GOP per capita state banquets, and has even gone so
watched the rescue live on TV and the shot up by 12.8 per cent. China, which far as to specify the number of courses
Internet. The proliferation of American- has taken its liberalisation reforms for official meals: four courses and a
style MBAs among policymakers and begun by Deng Xlaoplng much further, soup. He has banned shark’s fin, saving
business leaders around the world, has saw its GOP growth rate grow from an many sharks (an endangered species
created a common language and set of average of 5.3 per cent in the period of on our planet). This attention to public
values among elites. We saw how our 1960 to 1978, to a 9.41 per cent average opinion is an implicit recognition by the
interdependence and connectivity can in 1979 to 1998. Communist Party that it needs public
help prevent conflict when we witnessed I have noted in my previous speeches consent in order to survive.
the flare-up In the border dispute and articles that the era of strong The final norm is multilateralism. Our
between China and India last year. leaders is over. We will never get another gravest problems today are transnationaI
FEBRUARY 2014 Investime 07
in nature, from pandemics to climate In the United States, where scientists, middle of its demographic dividend.
change, from international terrorism engineers and entrepreneurs from Yet the economy is floundering despite
to financial crises. This has led to a all over the world, compete with each an abundance of young people in the
proliferation of multilateral initiatives other on a level playing field, Indians labour force. According to the 2011
at both the regional and global level in consistently come out on top. Indians census figures, India’s working age
acknowledgement that transnational in the United States have the highest population is now 63.4 per cent of India’s
problems will require transnational per capita income of every other ethnic total popluation. China is even exiting
cooperation. One key outcome from group, earning $37,931 annually in 2010, its own demographic dividend as India
all of these forums and meetings is compared with the American national has entered it, creating an even larger
that civil servants and government average of $26,708. If Indians in India opportunity for India to lure investors
leaders meet more often and have could achieve only half of the per capita from China. Yet, foreign investors have
more opportunities for discussion and income of Indian immigrants in America, preferred Bangladesh and Vietnam
compromise, which also engenders India’s GOP today would be $24.65 trillion for manufacturing. The Philippines,
greater trust among policymakers. For instead of $1.85 trillion. Italy, which has a country with less than 8 per cent of
example, the Association of Southeast 5 per cent of India’s population, has a India’s population, has more workers
Asian Nations (ASEAN), the second most larger GOP. than India in its rapidly growing and
successful regional organisation after India’s full participation in the great highly lucrative business process
the European Union, has created several convergence is dependent on serious outsourcing industry.
offshoot regional institutions such as the readjustments among the Indian policy- For India to take full advantage of the
East Asia Summit, the ASEAN Regional making and business elite. Pratap Bhanu great convergence, it needs to leverage
Forum, ASEAN+3 and ASEAN+8 groupings Mehta, one of India’s leading intellectuals, certain assets it possesses that it is
which bring countries in the Asia Pacific spoke bluntly when he said that China has currently squandering. The first asset
“
THE SWELLING RANKS OF THE EDUCATED MIDDL“E CLASS
DEMAND MORE OF A VOICE IN THEIR GOVERNMENTS NOW, AND
WANT TO PARTAKE IN THE POLICY PROCESS INSTEAD OF SIMPLY
REAPING OR TOLERATING POLICY RESULTS
together every year. These include major a closed society but an open mind, while is its massive and highly successful
powers such as the United States, China India has an open society but a closed diaspora.The combined wealth of Indians
and India. mind. China may be a one-party state abroad is about $1trillion, or about half
These are all extraordinary with limited freedom of expression but its of India’s total GDP. While India is the
developments occuring at breakneck leaders are pragmatic and open-minded, largest recipient of overseas remittances,
speeds. Never before have so many an attitude summed up neatly by Oeng with a total of $70 billion flowing into
people risen out of grinding poverty Xiaoping’s famous saying that it does not the country in 2013, the Indian diaspora’s
so quickly and never before have so matter whether a cat is black or white, so contribution to the Indian economy
many people been so well-educated long as it catches mice. India on the other cannot be merely financial. India’s
or so well-travelled. These conditions hand is famed for its lively democracy and diaspora represents an immense store
create enormous opportunities for energetic debates, like Amartya Sen’s The of human capital. In the United States,
canny businesses and policymakers. Argumentative Indian. However, India Indians have founded 18 per cent of all
In my book, The Great Convergence, I is still clinging onto some outdated and technology and engineering startups
wrote about N. R. Narayana Murthy’s misguided economic concepts, which nationwide, while comprising less than 1
lnfosys, one of the pioneers of India’s has unfortunately made it into one of the per cent of the total U.S. population. 14
booming outsourcing business, and more ideologically hidebound societies in per cent of all Silicon Valley companies
Vinod Khosla’s Sun Microsystems. I the world. So-called conventional wisdom are founded by Indians. Several top
have written about the wide disparity goes unchallenged to the detriment of American business school shave Indian-
between India’s potential and its actual lndia’sgrowth. born Deans, including Nitin Nohria at the
performance, and it could not be clearer One of my greatest fears for India is Harvard Business School, Sunil Kumar at
when you compare the innovation that it will sail right through the golden the University of Chicago and Soumitra
and the quality of India’s companies opportunity that the great convergence Dutta at Cornell.Dipak C. Jain, possibly
and entrepreneurs with the country’s represents, without taking advantage the first Indian to head an American
economic performance. of it. At the moment, India is in the business school, was Dean of the Kellogg
08 Investime FEBRUARY 2014
School at Northwestern University for 13 other businesses as well, bringing down The bottom line of all this analysis
years, before becoming dean of INSEAD operating costs. is that India remains a country with
from 2011 to 2013. The second major asset India possesses enormous potential. Indeed, India may
Persuading these hugely successful is its favourable standing in the eyes well be the number one country in the
and innovative business people that of the international community. Unlike world in terms of the gap between its
India sorely needs to come back home China, whose rise has been generating potential and its performance.
after having experienced state-of the-art deep concern in the West, India has good McKinsey recently published a
facilities and lavish public and venture relations with most of the world. In fact, as volume entitled Reimagining lndia
capitalist funding, not to mention the the recent visits of President Park Geun- (McKinsey and Company,http://
polltlcal and legal institutions that hye of South Korea and Emperor Akihito www.mckinsey.com/features/
create space for businesses to flourish, and Prime Minister Shinzo Abe of Japan relmaglnlnLindia_book.). In this volume,
will be no easy task. In 2013, for the to India have shown, China’s diplomatic I published an essay that said that if
third consecutive year, India fell in challenges are presenting new valuable the average Indian could achieve a per
the World Economic Forum’s Global opportunities for India to strengthen capita income that was half that of the
Competitiveness Index rankings, slipping relations with its partners. average Indian in the United States,
to the 60’ hspot out of 148 economies The third major asset India has is the India would have a GOP that would
from the 59’ hspot the year before. While remarkable skill of its economists and be $25 trillion instead of the current
India did well in the indicators that were policymakers, which has no equal any $2trlllion.
based on its sheer size, such as GOP where in the world, except perhaps in Given this massive potential that
in purchasing power parity terms and Singapore. The Indian government is filled India has, and the enormous surge made
domestic market size, it did very poorly with world class economists, including by many developing countries in the
in the policy-related aspects, coming in Prime Minister Dr. Manmohan Singh and past three decades as part of the great
“
“
THE THIRD MAJOR ASSET INDIA HAS IS THE REMARKABLE SKILL
OF ITS ECONOMISTS AND POLICYMAKERS,WHICH HAS NO EQUALANY
WHERE IN THE WORLD, EXCEPT PERHAPS IN SINGAPORE
128th in total tax rate and trade tariffs, Planning Commission Deputy Chairman global convergence, the time has come
for instance. Indians have long proven Dr. Montek Singh Ahluwalia. Reserve Bank for Indian policymakers and the Indian
that they are globally competitive of India Governor Dr. Raghuram Rajan public to work out a new consensus on
overseas, and it is time that they famously predicted the 2008 financial the steps that India can and should take
are given the opportunity to prove crisis, though his warnings fell on deaf to return to the rates of 7 to 9 percent
themselves on their own turf against ears. Dr. Kaushik Basu, Dr.Raghuram annualgrowth that India enjoyedIn
foreign companies. Rajan’s predecessor as the Indian recent years.
We are already seeing the strength government’s chief economic advisor, is The biglesson I learned from working
of Indian companies in certain industries. now the World Bank’s chief economist. with Singapore’s founding fathers,
After just five years in the smartphone This list goes on and on. However, Indian including Mr. Lee Kuan Yew and Mr.Goh
business, Micromax has the second pollcy makers are constrained by gridlock Keng Swee, is that to succeed, you must
largest market share in India and politics that has paralysed economic believe in yourself and you must be
is rapidly gaining on Samsung, the growth. In 2012, The Economic Times willing and able to learn from others.
number one smartphone brand. Indeed, found that large Indian multinationals had Many Indians have demonstrated that
Micromax has already expanded into enough cash on their books to fund huge they can do both. The time has therefore
other South Asian countries and even infrastructure projects, the equivalent come for India to seize this propitious
into Russia. Airtel is the number one of building over 40,000 km of six-lane moment of history and propel the Indian
mobile service provider in India, beating highways. Yet, that same year, private economy forward at an even faster pace.
out Vodafone, a massive multinational. investment in India’s infrastructure India’s moment has arrived.
Fierce competition among domestic declined by 52 per cent, resulting in
companies and multinationals on a level costly delays in plugging India’s massive Professor Kishore Mahbubani, Dean
playing field, in a notoriously price- infrastructure gap. Companies reported & Professor in the Practice of Public
sensitive Indian market, can only mean reluctanee to invest due to slowing Policy at the Lee Kuan Yew School of the
good news for not only consumers but growth exacerbated by policy paralysis. National University of Singapore
FEBRUARY 2014 Investime 09
Feature
As the world advanced, so did technology! While the digital
revolution took the banks and retail stores online, people
realised the convenience of taking their everyday chores online
(from shopping to managing bank accounts and the likes)
By Rahul Parikh
Head – Aditya Birla Money
MyUniverse
GO CLICK CLICK AND
Now just
INVEST ONLINE
in minutes
T
raditionally, Indians have been However, this has not resulted in wealth The pain points
great savers and the growth of creation for many due to complexity Typically much of our savings finds
the Indian economy has also and lack of awareness about financial their way into a fixed deposit that
contributed to increasing household products and lack of complete view of hardly beats inflation and doesn’t
incomes over the past decade. one’s finances. help much in wealth creation. Wealth
10 Investime FEBRUARY 2014