Prices doubled from 2009...enough said....
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  • Originally Posted by Venkytalks
    Comments:

    Countries with literate populations tend to have poor quality/communist govt. Such countries have per capita GDP ranging from 2500 (literate but ungoverned like North Korea) to 5000 (literate 2500, double for poor quality govt = 5000). Such countries are currently trying to finish the basic step of literacy. India is one such country. Such countries are currently in the transition from 2500 to 5000$ per annum. Examples are Egypt, Algeria, Ukraine, Indonesia. Literate populations within India are in the same stage. Until they achieve this basic level of productivity, further increases are difficult.

    Some Countries with highly efficient but corrupt govt are currently in the high growth phase. Examples are China, Brazil, Russia, Mexico, Malaysia. These countries have recently acquired efficient govt. Their population is largely agrarian (China, rural Russia, Malaysia) but is systematically transitioning to Literate/semiskilled and to highly skilled levels. Hence their national average reflects proportions of their population in these levels of development. So China has mainly Semiskilled labour (2500$ = 5000Rs per month) mixed with skilled (10,000$ per annum). Because of efficient govt, these are then multiplied by four. Hence national GDP per capita of around 4000$ with 1.3 billion people.

    Countries like Mexico (60 million population) , Brazil (200 million population), Russia (140 million population) have national GDP of 10,000 $ average. So does Poland, Malaysia etc.

    In this scheme:
    Lowest productivity is around 500$, highest is around 200,000$ productivity.

    If you are intelligent and skilled (20,000$), live in efficient non corrupt country (8 times = 160,000) and are of north europe/Japanese (1.25) then you can be productive to the extent of 200,000 $.

    India has a zero govt with focal poor quality govt.. Most population has 500 x 1 level of productivity. Some have 2500 x1 productivity. Very few have 10,000 x 1 and 20,000 x 1 levels. So if you are intelligent and skilled and adopt the non-corrupt efficient hard working ways of the north european/Japanese, maximum you can produce is 20,000 x 1.25 = 25,000 dollars.= 2000 dollars per month = salary expectation of around 1L per month ON AVERAGE for the best population pockets in India, assuming your salary reflects your productivity. So company salaries can be expected to be between 50,000 and 2L per month = the best you can do within India (usually best practices of north European levels are only found to some extent in companies). Of course, small number of managers in manufacturing relying on semi skilled workers (2500 $ = 10,000 Rs per month salary) can earn whatever amount – since these are a small elite group running the working of much more inefficient workforce. Company can pay them much above 200,000 dollars also, depending on their value to the company.

    Please note that because of very poor govt, no matter what you do, you cannot be more productive than 20,000 x 1 or 20,000 x 2 = no way out except emigrate for achiving higher levels of productivity (and hence income)

    China: It has a efficient but corrupt govt and has average per capita GDP of 4000$ = average of 500 x 4 levels (rural) and (2500 x 4 = 10,000 levels of production along with small numbers in the 10000 x 4 levels.

    Taiwan and South Korea have around 25000$ productivity i.e. average of 2500 x 4, 10,000 x 4 and small numbers of 20,000 x 4.

    Japan, UK, USA, north Europe has a large number of 2500 x 8 = 32K, many 10,000 x 8 = 80K and some 20,000 x 8 = 160 K leading to an average of around 45000$ per annum.

    Trends: Non-existent governance usually goes with slothful nature and illiteracy. Such countries like India, Bangladesh, Burma, Africa usually have per capita GDP of less than 500 (illiterate plus zero in govt plus 0.75% deflator)

    Mexico and Brazil have a lot of 2500x4, few 10,000 x 4 and miniscule 20,000 x 4

    Future Trend:

    This analysis clearly indicates that India is in a different position from China, Russia and Brazil.

    Growth in India is coming from shifting people from 500$ of productivity to 2500$ of productivity. This has to coincide with shifting from non-existent governance to poor quality governance. So far, this shift has been very difficult to manage (excruciatingly slow politicians) but slowly our younger population are becoming literate and employable at 2500$ productivity level. Since this has to coincide with a shift of the governance premium from single to double, India can look forward to shifting from 500$ per annum to 5000$ per annum productivity over the next couple of decades.

    This means a ten times rise in AVERAGE productivity levels = 1000% return on human capital = 10,000% return on any smart business which is able to capitalize on this gigantic shift in productivity levels.

    Russia Brazil and China can at best look forward to shifting from 5-10,000$ productivity levels to 20,000$ productivity levels = 2 times return on human capital. All three countries have skewed economies. Brazil has a growing population with commodity export economy, Russia has declining population and commodity export economy while China has a declining population with cheap manufacturing (2500-5000$ type) of economy.

    Shifting Chinese to 10,000$ productivity by a mix of 5000 and 20,000$ productivity should be easy enough. Then it will hit a demographic impossibility to grow.

    Shifting Russia from 10,000 to 20,000$ is probably more difficult because of declining education and engineering abilities. They have probably reached the best level of productivity they can. Russia is where China hopes to reach. Then both will pause without growth.

    Brazil has the best growth possibilities of these 3, because of increasing population and massive tourism opportunities. Probably it will shift from 10,000 to 30,000 levels within the next 3 decades.

    There can be no doubt on two things:

    India is a structural long term bull run in equities and for real estate for next 50 years (ours and our children’s lifetime)
    If you had money in 1950s, you should have invested in USA. If you had money in 1980s, you should have invested in China. If you had money in 2000, you should have invested in Brazil.

    If you have money in 2011, invest in India.


    Hi Venky,

    I did like the analysis, however, don't you think such transitions also depends on numerous factors not described here and some of them can only be presumed but not predicted. Like -

    1. Climatic changes, aka - Monsoon - since agriculture still contributes 30% of our GDP, it still employs almost 60% of our workforce, entire rural economy is agri-based, and, industries also depend on it for cheap raw materials (to certain extent).

    2. Governance - as you stated that currently India has virtually non-existent governance, however few states have started showing stark improvements. States like Gujarat, Uttarakhand, and, now even Bihar are much better governed than others.

    3. Fiscal & Monetary Policies - By God's grace, if somehow we get some good guys on top in our commerce & finance ministries, they can actually do wonders.

    4. Global economic envn - its impact can even be realised today. And as our economy move closer to global economy & we open up more, we become more susceptible to external shocks.

    5. Internal Security situation - this i would like to refer specifically due to Maiosts problem that has engulfed almost 15 states. These states are our resource baskets, and whole lot of companies are not able to operate there due to this single biggest factor.

    There could be lot many i would've missed.
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  • Hi Bhuvan B,

    YOu are of course right, there are many other factors. I had written on some of them here:

    https://www.indianrealestateforum.com/forum/other-forums/general-real-estate-discussion/12842-long-term-predictions-2011-2012-2013-and-now-2014?t=15139

    No prediction is likely to be even 50% right - who could have predicted the Jasmine revolution, Japanese earthquake, London riots or even latest Fed action?

    Thousands of people watching, not one predicted a single one of these events.

    Anyway, go through my predictions - I have similar thoughts as you on many of your points, I agree with most of what you said.

    This particular post above on productivity was a guess-estimate kind of calculation - an easy way to estimate a ball park figure for productivity changes.

    TO make investment decisions easier
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  • Would be keen to know how the RE correction going in Pune. How much have the prices fallen down so far.
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  • Originally Posted by kumarm77
    Well said Venky -thought provoking data. Certainly India is the place to invest for next 2 to 3 decades - not sure about 50yrs. M kumar


    well 2 decades is long time let alone 50 years....who could have predicted in 1985 about what would happen in 2015.....so if one has strong beliefs about next 10 years then one should follow that...

    only certainty I would say is inflation i.e. currencies loosing their value.......going back to my broken record of demand v supply.....supply of fiat money is infinite under modern central banks and governments....
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  • Re and gold

    Can you hold RE in india as next best to gold - may be yes
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  • Funny thing.. For 'uncertain' future we do investment expecting 'sure' returns!
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  • Originally Posted by kumarm77
    Can you hold RE in india as next best to gold - may be yes


    You should have both. They are different asset classes altogether
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  • Originally Posted by stoxxx
    Would be keen to know how the RE correction going in Pune. How much have the prices fallen down so far.


    any signs of correction in Pune RE? Waiting game continues?
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  • Originally Posted by stoxxx
    any signs of correction in Pune RE? Waiting game continues?


    folks any news...
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  • no, no news of prices correcting yet. but people are glad that there are no folks posting "prices have doubled. enough said." posts any more. any word on the appreciation of the real estate prices? any news?
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  • Originally Posted by stoxxx
    folks any news...


    Much more chances to get some freebies or good discount in this Dusara/Diwali, I would say lets wait and watch what happens :)
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  • Originally Posted by pawarnilesh
    Much more chances to get some freebies or good discount in this Dusara/Diwali, I would say lets wait and watch what happens :)


    Rightly said...
    Yes...freebies like Stamp Duty and car parking Free...May appear in newspapers...
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  • Looks like Pune is headed for a correction.

    But the bull run continues elsewhere in Gurgaon. Recently, land prices have firmed up in Faridabad and NOIDA and might remain firm for a while.

    I am also hearing about Chennai and Bangalore prices standing firm and early trends for an upmove in the South are becoming visible - it is likely to materialise when RBI pauses or reverses rate increases - probably after about 6 months.
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  • Today IIP numbers were released and they were disappointing. The current IIP is 3.3% vs 8.8% last time.

    Even the FM was saying that this will affect our GDP. So from that one can guess their own conclusions as to whether recession/correction is coming or not.
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  • Originally Posted by pawarnilesh
    Much more chances to get some freebies or good discount in this Dusara/Diwali, I would say lets wait and watch what happens :)


    thanks for the info
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