Same Shite Different Continent!

So I’ve been following the food ‘crisis’ situation in different parts of the world for the past few weeks. You know trying to spot the fundamentals from an economic point of view. Anyway, with this still fresh on my mind I began my vacation in India. I landed in India (Bombay-sorry I refuse to call it the new name) on Sunday. And what do we have here?! I picked up a newspaper and a commodities trading magazine and voila:

-Inflation in India is at 7%
-Central and State Govts. are in trouble
-the Indian equivalent of CPI is 220 (yikes!) after being in 200s the past year as well
-rice prices have increased 60% in the last few years
-cooking oil prices have doubled in the last year
-Govt. has banned futures trading of rice, wheat, and corn
-Govt. is considering banning forwards trading of grains (despite no evidence that these have caused the food crisis)
-local politicians are blaming each other for keeping the poor out of this boom.

More evidence of inflation: I went to a local market in Hyderabad to buy fresh fruit. A single apple costs Rs. 15 (40 cents) a single orange Rs. 8 (20 cents), and a pomegranate Rs. 10 (25 cents). What’s the problem you ask? Well, these used to be 50% cheaper not more than 3 years ago.

Contrast this with what I saw on CNBC India (which I have to say is miles better than the shite CNBC we get in the US) and learnt from a conversation with a fellow Sloan admit who lives in Hyderabad:

-2 Indian businessmen entered the top 10 World’s Wealthiest list this past week
-There are now 3 software services Indian firms that boast of $2 Billion revenue
-Average compensation for IBankers with 4+ yrs exp in India: $250 K minus bonus
-90% of Harvard Business School Class of 1997 who went to undergrad in India are now back in the US and are now running 30+ Hedge Funds out of India
-The spanking new airport in Hyderabad (apparently the largest in Asia) cost a staggering $1.5 Billion
-The cost of a new elevated mono-rail being built in Hyderabad: $1 Billion
-Real state increases at the rate 200% every 2 years (ouch!).
-Hyderabad is apparently the Micro-Finance capital of the World (A bold statement yes, but this guy who works for one in Hyderabad made it)

The contrast is unmistakable. Safe to say the distribution of wealth goal has gone awry in a bad way. The boom seems to definitely have established a strong middle class in India that is not afraid to spend. But the poor (notably the farmers and those with little education or means to secure decent paying wages) have been left behind. Disturbing yes, and more disturbing in that the Govt in India is holding this together by controlling the prices of many essentials including Gas (petrol in this part of the world). I read someplace that the Govt is sacrificing ~3% GDP by subsidizing Oil. I have to say, from the outside to me, this does not bode well for the future. The government has to figure out a way to get the poor involved in this boom even if it means the rich have to sacrifice a bit of their bonanza. This we know is easier said than done. But I see no other way a chaotic situation in the next 5-8 years can be avoided if this continues.

More about my India trip in the next couple of days. I’ve been invited to a game in Hyderabad for this new Cricket league that started in India (Top 20). The game’s tonite, although I have not followed cricket in a while, I am interested in going to see for myself if this business idea will sustain for long.

later