Modern Economies

In India, we ridicule ourselves of being called a ‘developing country’. For how long? Aren’t we ever going to reach there?

But the fact remains that we are 1.3 billion strong, with 70% of the population being in the 15-64 age group. It means the spending power is there, and is likely to increase.

Companies which face saturated markets in their own countries eye this one as a goldmine for the future. These companies range from FAANG to fintech companies.

Amazon, Google and Facebook (Whatsapp Pay) have all got into the digital payments space to gauge the size of the market. Indian fintech startups are being funded by foreign investors with the same purpose. Buy Now Pay Later, credit card challengers, neo-banks, micro-investment apps, payment apps are all products of this trend.

Some of these have already got into trouble. The founders of a BNPL company called ZestMoney have resigned en masse, leaving the startup high and dry. They were operating on thin margins, and then hit a roadblock on poor debt recovery.

This is the background of the capital market story where larger games are played.

Investors fund startup losses for a couple of years. Consumers -enjoy low prices and unbelievable deals for some time. Massive growth trends are forecast and the company enters the stock market with an Initial Public Offer. The idea is to offload shares of a loss-making company on gullible retail investors, and walk away with high returns on their investment.

Finfluencers are paid obscene amounts to recommend a share, and they encash the huge social media following they enjoy.

The shares of some of these glorified companies have got listed at prices lower than the inflated IPO price they paid. Obviously, the enthusiasm of retail investors is cooling off.

Government schemes are not helping the common man either. Tax incentives from small savings are being gradually diluted. Huge ad campaigns are launched for small investors to tell them they can start at an amount as low as INR 500 a month in a systematic investment plan. As usual, the disclaimer that all investments are subject to market risk gets drowned in the din. The idea is to divert funds from banks to capital markets, so that big business gets equity investments, rather than debt from banks.

IMO, the divide between the rich and poor is getting wider, as the privileged corner all benefits. Social welfare schemes in a population as large as this are not worth talking about.

Surveys show that a huge segment of the population is not adequately prepared for retirement. Senior living communes are very few and not cheap. As the next generation moves abroad in search of greener pastures, the seniors are going to lead a difficult life.

Inflation is a massive issue.

Non-banking finance companies and banks are giving away unhealthy amounts of unsecured loans. Default rates are increasing, as the bomb ticks away for these lenders.

Malpractices flourish in the realm of lending, debt recovery as well as manipulated balance sheets.

I don’t like being a doomsday forecaster, but the future is not so good for the so-called common man or woman.

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Friday Faithfuls