Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Baruch. hats off for your post . Think this would the best I have read so far in IREF in many years. Please keep such things coming.

    wiseman. for first time I am agree with your post :)

    My hats off to all such people who stood strong against the corruption and the reason I liked these post is that all the while corrupt people are being projected like they are invincible and can't be touched etc. But these posts give hope that standing by your point (once you are right) may just what is required to fend off these jackals.
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  • Top 10% of economic crimes by size every year, just take them out and shoot them! Seriously! It worked all through History, so why not now, when we are reaching historic highs in economic crimes?
    You fail to execute convicted murderers for two decades.You fail to execute people convicted of murdering a honble former PM.
    Do you ever think we will execute people for economic offence??
    Our nation will be left with no decision maker then by this execution decision.
    It is a sad reality that many of our decision makers are corrupt and prone to take decisions based on other name national or commercial sense.
    We are no China.
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  • Precariat = people with temporary jobs and no security

    Technology is wiping out jobs in the West, and now increasingly in India as well. ‘Temping’ is the new norm
    What do we talk about when we talk about growth? What do politicians, policymakers mean to tell the nation when they despair of low GDP numbers or cheer a rising growth rate?

    That ought to be at the centre of discussions on the Indian economy, on public policy, the evaluation of extant government practices and on the promises held out by the stellar opposition.

    One of the things we ought to be talking about when we speak of growth is, of course, employment. Higher output of goods and services, reflected in GDP, should obviously mean more jobs for people, especially the young.

    It is exactly on that relation that the current race between the Congress and the BJP will be fought. The BJP’s prime ministerial candidate promises strong leadership for a disciplined and clean march to growing prosperity.

    The worth of the Congress lies in its past performance, in those years of the last decade when India came knocking at the doors of the rich men’s club. That’s when India began to be counted as something of a force along with China, a bulwark against the sliding fortunes of world trade and growth.

    What did India’s economic standing mean for jobs and growth in employment?

    When the middle-class in cities spoke of growth, it meant the mushrooming of malls, the frenetic screeching of drills and the ungainly sights of iron rebars reaching for the smoggy sky and towns turning into vast construction sites.

    But what did that do for job creation? The latest NSSO data may give the Congress something to crow about since it records a rise in employment in the two years up to 2011. But the jobs were mainly in agriculture with some growth in the secondary and tertiary sectors. Since then, there has been a sharp fall in GDP growth.

    A yawning gap

    Growth theories assume that economic expansion will or should lead to an expansion of jobs in the manufacturing and other non-agricultural sectors. So is that happening in India?

    Evidence from the NSSO’s 66th round did point to such growth but it also noted an increase in the casualisation of work.

    That form of contract or casual work was also noted in a study by the US Department of Labor for the period of India’s high growth. In fact, factory employment went down, and permanent employment dipped as contract work increased.

    Now we have Assocham telling us somewhat the same thing. Contract work is increasing and, what is more distressing, it is increasing with fewer benefits for the workforce.

    The paradox of jobs

    Last year alone contract work increased 39 per cent — not in the informal sector such as construction or in small shantytown enterprises but in the formal sector.

    This means automobiles telecom, retail FMC, IT, BPOs, healthcare, education — just the sectors that define the modern economy, that provide the fuel for the growth of consumption and thereby of GDP.

    The Assocham survey is tellingly titled: ‘Rise of Permanently Temporary Workers. India’s Workforce Goes Casual’. The wonderfully evocative paradox hides the terrifying possibility of not just life’s randomness but of the means by which to sustain it. Now, even work has become a random option and that is a fact of life.

    Assocham tells us that the rise in such permanent impermanence of work owes much to the inflexible labour laws in the country. But it protests too much.

    The rise of impermanence

    The phenomenon of temporary staffing as it is variously called, is gathering pace even in countries with very liberal or few labour laws. And in the country India dreams of becoming, impermanence of labour is only a step away from its extinction.

    In their e-book, Race Against the Machine , MIT professors Erik Brynjolfsson and Andrew McAfee point out that jobs are vanishing in America both on the shopfloor and in the office; robotics is replacing the blue collar worker and now increasing digitalisation will replace the white collar worker.

    After studying the top four tech firms in the US — Amazon, , Facebook and Google — they found these firms generated far fewer jobs than one would have thought in light of their combined market capitalisation at the time and far fewer than what the US needed for recovery.

    Hacking itself

    In cutting labour costs, the modern economy cuts its own feet because it reduces jobs and, therefore, consumption demand. That’s in the US. In India, the vast pool of cheap labour, including the growing pool of skilled youth armed with degrees in management, engineering, fashion designing, catering, flying and the media, allows industry to engage contract labour.

    And as high-tech and automated technology kicks in, for instance in new private banks that would also like to avoid the headache of unions, the rate at which new jobs — contract, temporary or casual — are available, will fall.

    The implications of blue and white collar labour displacement by high-tech are evident in the increasing emphasis of policymakers around the world on wealth creation. GDP numbers may rise on the back of a vast army of a permanently temporary workforce; so would profits for firms that may pay higher wages for the duration of the contract but little by way of social benefits that add to well-being.

    But the net effect would be wider disparities not merely in incomes but in well-being as the benefits of rising GDP accrue to fewer wealth ‘creators’.

    But so long as GDP grows, will employment numbers really matter?

    (This article was published in the Business Line print edition dated February 12, 2014)
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  • Small correction

    Originally Posted by rambler
    Technology is wiping out jobs in the West, and now increasingly in India as well. ‘Temping’ is the new norm
    What do we talk about when we talk about growth? What do politicians, policymakers mean to tell the nation when they despair of low GDP numbers or cheer a rising growth rate?

    That ought to be at the centre of discussions on the Indian economy, on public policy, the evaluation of extant government practices and on the promises held out by the stellar opposition.


    Its not technology itself that is wiping out jobs.

    Its "automation" that is the culprit. I have been warning from time to time that it is still in infancy stage, but with change becoming so rapid, within a decade automation will be making huge inroads by replacing people at at much greater efficiency.

    This automation is coming into every area, even including high level human intelligence. Of course, one may say that machines cannot compete with humans in really high-level thinking and so will not be a real threat.

    Thats exactly what blacksmiths thought when they were asked to forge parts for machines that made crude "things" while the blacksmiths themselves made fine articles of the same type.

    This was in the mid-to-late 1800s. Over the next 50 years machines progressively became better and by the 1930s blacksmithy was going the way of the dodo.

    I'm afraid we may be treading the same path, unfortunately this time in every area!:(

    Where is the next "Industrial Revolution" going to come from? This is the big question.

    cheers
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  • Shocking :-(

    Baruch - what is shocking in this. This everyone knows whoever is related to finance domain. Kaunsi badi baat hai yeh. Even the major market trends and commodity manipulation is decided in evening parties by people concerned with the finance ministries. Results related to major banking decision and Government decisions and opinions are leaked. People already take a position and mint money like dirt.. There are also news that various mnc investment firms take a sneek peek at the positions the people are holding. They move the market till the stop loss and the leave the commidity to flow in normal trend in evening time. Who shows them these positions. Also most of the government coffers are looted by people like 'clock wala' baba. Who do not own a four wheeler. Next target will be PF, PPF, LIC and moeny in post is what I feel.. There are also news that various mnc investment firms take a sneek peek at the positions the people are holding. They move the market till the stop loss and the leave the commidity to flow in normal trend in evening time. Who shows them these positions. Also most of the government coffers are looted by people like 'clock wala' baba. Who do not own a four wheeler. Next target will be PF, PPF, LIC and moeny in post is what I feel.
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  • compuwalah Bhai

    Bhai Compuwallah - you should be on the other side of the fence if corrupt people were not there and black money was non-existant how would you have reaped the benefit of this so call property appreciation. Rather you should take a photo and show a agarbatti daily to 'bobada saheb' it is sheer hardwork of people like those that the bulls in this forum had a good run with their money.
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  • Originally Posted by NCRTalk
    Realacres Bhai - What is your take on Pune RE rates before and after Loksabha election 2014.

    Do you see a rates fall (long overdue) in below scenarios -

    1. case of a weak goverment in centre like third front one

    2. Builders in need of money by selling flats to meet election expenses

    Sorry for delayed response man, came back to Pune today only.
    See speculative markets in India :- MMR, Pune & NCR. The first 2 are driven by 'Clock' while last one is driven by 'Panja'. Historically, whenever Congis are in power, RE goes up for the simple reason RE is the favourite place for Congis to park their ill-gotten wealth. Junk Vadra is classic eg. of it, earn crores without single rupee investment.

    Congis out not only from Centre but from state will be good, not just for RE but overall quality of life in the state, including industries & agri.
    Something like 3rd front Govt would put India on wheelchair, handicapped & powerless.
    RE is minor stuff man, entire FIIs & investments in India will run out. Even if Congis come back to power, India will loose its charm (whatever is left now), 3rd front would put India at par with African countries. The US Aviation agency, FAA has downgraded India & India is in league with African grade countries. :(



    As far as builders are concerned, no matter what, they will have to sell flats as money is needed more before elections. Estimates suggests that atleast 15,000 Cr will be pulled out from RE from Pune-Mumbai belt before elections.

    Btw, Pune airport is now looking much better man. :) Earlier it looked typical IAF airport, now some civilian look is visible & I must appreciate the efforts put up by ground handling staff, they manage a flight for every 7 mins now !!
    Anyone here saw Mumbai T2 ? Heard lot of praise about it. Want to compare it with IGI T3 (this my current fav in India).

    Originally Posted by ashish18
    Govt or no govt. Good or bad economy - RE is dead simply because it has become unaffordable, unrealistic and gone into the hands of crooks. Most of the genuine buyers have even stopped looking at brochures. Till then investors can keep flipping, looking at buying, whatever they want. But buyers are not going to come to this market for next many years.

    +10000
    And add to it that RETAIL INVESTORS have moved out of RE.
    To simply put, earlier one would find RE brokers no. on tree, paan-tapri, photocopy/XEROX shop etc. now it's gone.
    1 local ex-RE agent has joined his brother to look after their laundry shop. Just shows the real situation on ground.
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  • Baruch, wiseman,
    +1 to what you have posted.
    This bank stuff is there for long, look what happened to Rupee bank or many other co-operative banks which went burst due to 'Bobada' & dada. And where this money went ? In RE & building some 5* hotels in Pune, some are owned by major city builders.
    People lost their deposits, & these animals made merry with that money.

    Originally Posted by vhaldavnekar
    Bhai Compuwallah - you should be on the other side of the fence if corrupt people were not there and black money was non-existant how would you have reaped the benefit of this so call property appreciation. Rather you should take a photo and show a agarbatti daily to 'bobada saheb' it is sheer hardwork of people like those that the bulls in this forum had a good run with their money.

    +1000.
    And couldn't stop laughing with agarbatti to 'Bobada' :D. True indeed.
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  • Perfect analysis, realacres !
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  • Bloodbath at IBM India

    2,000 may lose job in country, 13,000 layoffs worldwide.

    In what may turn out to be the biggest-ever layoff drive among global biggies, IBM is believed to have started cutting jobs globally on Wednesday, with first casualties said to be in India.

    Poor fourth-quarter results reported last month, marked by a 26% slump in hardware revenue, is suspected to be the main cause of layoffs. Worldwide, IBM employs 4.3 lakh people and reports say some 13,000 jobs are likely to be cut as the tech major performs a “global rebalancing” act, termed “resource action” or RA, that could save about $1 billion in costs.

    WralTechWire (WTW), a tech-related website, quoted IBM staffers in Bangalore as saying that “people broke down after seeing the inhuman treatment. Laptops along with the cases were confiscated, so several employees were seen crying and exiting building carrying and balancing their personal belongings with their two hands”. Unofficial estimates put the sacking number at around 1,000 in Bangalore alone. :o

    IBM did not confirm the layoff and did not reply to emails from dna till late on Wednesday night. But sources confirmed that hundreds of IBM staffers at its Bangalore office were asked to leave suddenly. Some of them, it is said, were given just a couple of hours notice and asked to leave behind their laptops and vacate the premises pronto.

    Talk among recruitment experts is that IBM may be targeting up to 2,000 job cuts in India where it employs 1.3 lakh in all. The worst affected could be the Systems Technology Group where 25% of the hardware division, or a few hundreds of employees, are expected to be axed, following the decision to sell its global low-end x86 server business to Lenovo for $2.3 billion, also entailing transfer of some 7,000 IBM staff to Lenovo.

    “That is a guesstimate since layoffs happen over a period of months. Job cuts will be less in India than elsewhere since manpower costs here are low,” said an HR expert in Bangalore. In India, Bangalore is a key centre for IBM with major office blocks in Manyata Embassy Business Park in Hebbal and Embassy Golf Links near Domlur.

    An HR expert said any jobs cuts at IBM would not be “surprising since MNCs have a history of laying off workers”.

    Kris Lakshmikanth, co-founder of Bangalore-based search firm HeadHunters India, said any layoffs would not happen overnight but gradually. “Firms such as IBM are also not giving any salary hikes this time.”

    Globally, other tech firms like Intel and Texas Instruments are reported to be laying off 5,000 and 1, 100 employees respectively. Even in India, there is speculation that iconic IT firms may well lay off up to 2,500 staff each during the January-March quarter.

    Another source told WRW website: “IBM India’s STG is doing ‘RA’ and it is very deep and numbers are huge. It’s a slaughter.” Yet another source told WRW: “RAs expected to last till Friday.”

    Bloodbath at IBM India | Latest News & Updates at DNAIndia.com
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  • Originally Posted by vhaldavnekar
    Bhai Compuwallah - you should be on the other side of the fence if corrupt people were not there and black money was non-existant how would you have reaped the benefit of this so call property appreciation. Rather you should take a photo and show a agarbatti daily to 'bobada saheb' it is sheer hardwork of people like those that the bulls in this forum had a good run with their money.


    Wish you kept your flawed thinking to yourself :)
    Why do you think that I made profit by investing in properties ?

    Few things. The property market is up because there is a basic demand. Not because some "not so good" person manipulating the market. If the basic demand itself is not there, no amount of crook persons can jack up the prices. Even if they managed it, they won't be able to keep up prices for so long and across India. There are always reason behind every price rise. Gold price rise was caused because of panic, which caused demand, which cause price rise. Though the panic has gone but it left the Gold prices at higher level. Prop price rise was due to basic need, people having more income and ready to pay higher price, resulting in increased demand. This however has reated a new baseline for prices which will be sustained unless some big negetive event take place.

    BTW your dream of investors panicing , running helter skelter, selling prop at low prices shows following
    You are frustrated with price rise overall (this is shared by many people, no surpises there)
    You are motivated by hate towards builders (again this is common trend)
    You are motivated by hate towards investors who made profit and hold them partially responsible for the price rise and count them in same line as crooks.
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  • many skeletons in the closet :-(

    ==========

    Is bad loan menace at United Bank of India a cover-up after serious lapses? - The Economic Times

    Is the bad loan menance at United Bank of IndiaBSE -1.60 % a cover-up by the bank's management after serious lapses? Sources close to the development say, the report prepared by RBI-appointed forensic audit firm Deloitte suggests serious lapses on the credit appraisal and automated NPA detection system of the bank. Sources also say that the report suggests that NPAs were not being detected for past two and half to three years.


    A senior banker in the know says, "the automated system that detects NPAs was found switched off, whether it was intentional or by mistake remains a big question." The Reserve Bank of India had appointed Deloitte to conduct a forensic audit on the bank.


    UBI posted a net loss of 1238 crore rupees in Q3 compared with 42 cr net profit a year ago. Serious questions have also been raised on the bank's capital position. The bank's tier 1 capital has fallen to 5.6% as of Dec, 2013, which is below the minimum capital ratio stipulated by the RBI
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  • and what is the hurry to save these firms ? Why cant GOI allow few banks to fail ?

    It will at least tell AAP minded fools that we are better off if private sector does the business and Gov does the governance

    United Bank of India may get capital injection from govt - Livemint
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  • Reduced income opportunities rather than inflation is what is really behind people spending less
    That the ongoing economic slowdown has its roots in a collapse of investments is well established now. The best indicator of this is production of capital goods, which has registered a negative year-on-year growth in 23 of the 30 months between July 2011 and December 2013. But no less striking is the way consumption has been affected. The index of industrial production (IIP) figures for December reveals a negative growth in consumer durables — TVs, mobiles, cars, bikes, fans, ACs, refrigerators, ceramic tiles and carpets — for the thirteenth successive month in a row. The IIP numbers show a weakening of consumer durables output growth taking place from July 2012. Since the average growth for consumer non-durables from July 2012 to December 2013 also works out to just 4.7 per cent, we can conclude that the overall slowdown in consumption spending is more than one-and-a-half years old.

    The most obvious cause of weak consumption is inflation, which undermines the ability of people to save and consume. National income statistics bear this out: household savings, both financial and in physical assets, have fallen from 25.2 to 21.9 per cent of GDP between 2009-10 and 2012-13. Once savings are eroded in the face of persistent inflation, the effects are bound to be felt on consumption. Within consumption goods, durables are the immediate casualty because in many cases their purchases can be put off — which is not so with toilet soaps or cooking oil, where the only option is to go for cheaper brands. The story of the last three years or so largely fits this pattern. If inflation is indeed the main villain, then it may appear on the face of it that the main task is to fix it in order to get people to consume and save more and, in turn, pave the way for growth.

    What this argument ignores, however, is the link between collapse of investments and slowing consumption via drying up of job and employment opportunities. Data for the companies constituting the NSE’s broad-based CNX-500 index shows employee expenses registering over 17 per cent growth in the last four quarters. This, along with increasing rural wages in real terms, does not suggest that inflation is eating into incomes to the extent that is commonly presumed. Instead, it is incomes themselves that seem to be under threat as a result of less jobs being generated from a drying up of investments. The crisis today is really about firms experiencing a shrinking of margins due to the increased outgo on wages, interest and fuel, on the one hand, and poor demand conditions, on the other. Many of them have responded by cutting down on hiring and putting off capacity augmentations. With job opportunities shrinking, so has consumer spending as well.

    (This article was published in the Business Line print edition dated February 14, 2014)
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  • Originally Posted by Baruch
    many skeletons in the closet :-(

    ==========

    Is bad loan menace at United Bank of India a cover-up after serious lapses? - The Economic Times

    Is the bad loan menance at United Bank of IndiaBSE -1.60 % a cover-up by the bank's management after serious lapses? Sources close to the development say, the report prepared by RBI-appointed forensic audit firm Deloitte suggests serious lapses on the credit appraisal and automated NPA detection system of the bank. Sources also say that the report suggests that NPAs were not being detected for past two and half to three years.


    A senior banker in the know says, "the automated system that detects NPAs was found switched off, whether it was intentional or by mistake remains a big question." The Reserve Bank of India had appointed Deloitte to conduct a forensic audit on the bank.


    UBI posted a net loss of 1238 crore rupees in Q3 compared with 42 cr net profit a year ago. Serious questions have also been raised on the bank's capital position. The bank's tier 1 capital has fallen to 5.6% as of Dec, 2013, which is below the minimum capital ratio stipulated by the RBI


    Need to do a simple audit in all banks to see in how many banks this switch is off?:bab (59):
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