Why India needs a "Bond Market"?

Why India needs a “Bond Market” ?

Swelling capital inflows in the equity markets is concerning me a lot. The only comforting fact is that Rupee has not yet appreciated beyond the crawling peg range and it is still long way away form pre Lehman era of 39-40 levels against the Dollar. What concerns me is that the FII inflows have flooded the equity markets and there is no mechanism in place to channelize these robust inflows to key areas of the economy like infrastructure and other priority sectors. The markets are fair valued at these levels and any upswing or bullish run beyond these levels with create an asset bubble and overvalued assets. A well developed Corporate Bond Market would have been handy in these circumstances.

India lacks a well developed Corporate Bond Market and the fact we badly need one was highlighted by PM Manmohan Singh at the recently concluded Indian Economic Forum. Through corporate bonds FIIs can join the Indian party by investing in long and medium term assets both through direct and institutional investment. We need a mechanism to channelize these savings in the corporate and infrastructure sector particularly by having a very well lubricated and functional corporate, municipal and even local government and project bond market. We not only need fast track reforms to develop a functional bond market separate from government treasuries but need judicial reforms to speed up the process of justice in case of a default, delinquency or worst case scenario of a bankruptcy . Only when the judicial reforms guarantee some faith in the judiciary can a well structured bankruptcy code be developed and implemented, which is not less then a lifeline for investors in the bond market.

Outsourcing Traffic Management

Sum proposes an outsourcing model for traffic management in India

Outsourcing has a simple business philosophy; a process or a function should be outsourced if it gives the company a cost leadership (or even cost saving) and can be performed or executed with more precision and efficiently than if performed or executed by the company itself. “Bangalored” as outsourcing is popularly known in US, has given a lot of companies billion of dollars in cost savings and given some other companies a more focused approach towards their core business operations and functions while preferring to outsource the peripheral activities and operations. Dell is an example how a company can gain competitive advantage with outsourcing. It outsources its production such that it is now just an assembler of customized PCs and Notebooks. It has the advantage of maintaining minimum inventories by adopting a JIT inventory approach.

While private sector is reaping the benefits of outsourcing, public sector is not left behind. A large chuck of BPO Company’s revenue in India comes from domestic outsourcing a bulk of which is from the public sector. TCS is in advanced stages of implementing a pilot project for preparing fast track passports.

The other day I was driving down a rickety and poorly managed national highway with chaotic traffic management when it occurred to my mind, why not outsource “traffic management” in India. Suddenly my mind was filled with pictures of smartly dressed men and skimpy dressed lady ‘private cops’ managing traffic with outmost precision. Never have traffic management been better or more profitable. The revenue from traffic tickets and other offences is booming and I am conferred a noble prize for putting forward such a path breaking successful idea. My dream is broken by a pot bellied traffic cop who had signals me to stop, only for me to realize later that he wanted a lift from me. I still envy his job where he can just mismanage, bully, stop and barb at anyone. Never has any other job given such perks. All said and done I strongly vouch for a outsourced model of traffic management in India, the specifics of which I can specify over a couple of hundred sheets of paper. Just as bill collection, call management or even passport issuance (issuing an identity of national importance) be outsourced so can the traffic be outsourced, where there is no external or internal threat. The traditional traffic police force can of course be coordinated and integrated with the outsourced traffic management cops.