A big opportunity waiting to be tapped

September 20, 2015

By Gopal Krishna Agarwal,

With slightly over 20 million demat account and around 5 million retail investors, there is a humongous opportunity waiting to be tapped. This not only makes business sense, but is also in the interest of our country where investment needs are mind-boggling. It is time for the discount broking firms to join other industry players to work for increasing the size of the market.

Discount brokerage is only around five years old in India, while it has been around for over two decades in the more advanced financial markets like the US, where it continues to exist with the traditional broking firms. Although the emergence of discount broking has not rung the death knell for traditional brokerages or full-service broking firms yet, it has been causing a lot of anxiety to the market participants. Investors in every market are mostly swayed by the price and cost transaction, but there are also discerning buyers who don’t mind paying a higher price, provided the value proposition is right As the term itself suggests. The USP of discount broking is its extremely low rates of commission. As far as services are concerned, it offers none, except trade execution. Full-service broking firms, on the other hand, offer an entire gamut of services, ranging from research reports and trading inputs to financial planning and wealth management. Therefore, both cater to two different segments of the market.

Discount broking is meant to attract day traders who, otherwise, end up paying high brokerage on their trades. It also attracts more enterprising investors who, like the day traders, do their own research before investing. With the explosion of mass media, multiple sources of information are available to investors, mostly free. So, they are no longer dependent on brokers for information to guide their buy and sell choices. Such investors, however, are few and far between.

Investors who cannot follow financial markets either due to lack of time or skill would continue to remain with the full-service broking firms, as they depend on their research, recommendations and trading tips, since they mostly follow the buy-and-hold philosophy. Traditional brokers also retain the advantage of human factor. Investment in equities is complex and a little handholding is always welcome. Hence, a large number of investors prefer investment advisers with whom they can talk and interact. The traditional broking firms will deal with the emerging competition with discount brokers by either moving up or down the value chain. One way to deal with it is to unbundle the services and offer them accord- ing to the prospective client’s willingness to pay. Thus, within the same broking outfit, one can either opt for discount broking or a more premium service, where brokerage is bundled with research or market reports. We are already seeing this happening

Since the traditional firms will only be able to charge a higher brokerage for value-added services, their quality of research is likely to improve, which, in turn, will also upgrade the overall resilience and quality of information in the market. Some of the smaller brokerages whose research reports are not worth the paper on which they are printed would either have to improve their quality drastically or downgrade to discount broking. This might also lead to consolidation in the broking industry, as with falling margins and increasing compliance and regulatory cost, firms would try to achieve a certain size to reap the economies of scale. So, before discount broking and the accompanying cut-throat competition becomes a menace, market regulator Securities and Exchange Board of India (Sebi) should relax the norms governing the merger and acquisition of broking business to help the industry to consolidate. Even the exchanges need to do a lot with regard to fees, while the government must change the several tax laws to facilitate mergers and acquisitions

We believe that following Iite approach, Luddite think this matter is in nobody’s interest. We work in the equities market where the investors reward enterprises that do well and penalise that don’t So, to demand any kind of restriction on discount broking runs against the basic philosophy of the stockbroking business. So, no matter how much we insist on curbs, the desired results will not be achieved in a free market scenario.

It is for this reason that the Association of National Exchanges Members of India (ANMI) had reservations regarding the demand of a regulation on minimum broker age. It is likely that some of the traditional broking firms might perish in the face of this new challenge, but then, more efficient and innovative firms would replace them. This is the perennial gale of creative destruction that Joseph Schumpeter so eloquently talked about

It is pertinent to note that the cost of brokerage has never held back investors from the equity market, and to expect that discount broking will usher in equity culture in the country is completely misplaced.

With slightly over 20 million demat account and around 5 million retail investors, we have not even scratched the surface properly; there is a humongous opportunity waiting to be tapped. This not only makes business sense, but is also in the interest of our country, where investment needs are mind-boggling. It is time for the discount broking firms to join other industry players to work for spreading financial literacy and increase the size of the market.

The relentless march of technological advancement brings with it changes, some of which are disruptive in nature, but the human effort has always been to rise up to it. When the settled way of things change abruptly, there is fear of the unknown and even some overreaction, but then that is not wholly unexpected. This is not the first time that there has been a major shift in the way business is done in the stock market. We have covered a long journey from meeting under the banyan tree in Mumbai to hiding behind computer screens and executing trades at the speed of light.

Gopal K Agarwal is national convener of the BJP economic cell.

भूमि-अधिग्रहण का सच एवं भ्रम

April 1, 2015

गोपाल कृष्ण अग्रवाल,

आर्थिक मामलों पर भाजपा के राष्ट्रीय प्रवक्ता

भूमि अधिग्रहण विधेयक को लेकर विपक्षी दलों ने देशभर में जो माहौल बनाया है उससे भ्रम अधिक फैला है। जबकि सच्चाई दब कर रह गई है।

भूमि अधिग्रहण संसोधन विधेयक पर विपक्ष के तेवर उक्रामक हैं। उनका दावा है कि वर्तमान संशोधनों से इस विधेयक का स्वरूप किसान विरोधी हो जाएगा। ध्यान होगा कि जब भारतीय जनता पार्टी ने एक अध्यादेश के तहत दिसंबर 2014 में संशोधन लेकर लाई थी तो चारों तरफ इसका विरोध हुआ था। इसी को ध्यान में रखकर यह बताना आवश्यक है कि अध्यादेश लाना कानूनी अवश्यकता थो। ‘भूमि अधिषहण विधेयक 2013’ में एक क्लॉज था, जिसके तहत 13 पूर्व ऐक्ट ऐसे थे, जिन पर नवा भूमि अधिग्रहण कानून लागू नहीं होता। इसलिए उन 13 कानून के बहत अधिग्रहित की गई भूमि पर मुआवजा पुराने दर से ही किसानों को मिलता, यदि उसको 31 दिसंबर, 2014 तक इस नए कानून के तहत नहीं ल्या जाता। नए कानून कानून के तहत किसानों को ज्यादा मुआवजा मिले, इसके लिए अध्यादेश लाना जरुरी या। अध्यादेश के बाद जन संशोधन विधेयक संसद में लाया गया तो हर जगह इस पर तीखी प्रतिक्रिया हुई। यह कहा गया कि यह संशोधन किसान विरोधी है। जबकि स्थिति ऐसी नहीं है। जो भ्रम फैलाया गया, उसे दूर करने के लिए भाजपा ने छह सदस्यीय भूमि अधिग्रहण समिति का गठन किया। किसान संगठनों के प्रतिनिधि और सीधे किसानों से मुलाकात कर समिति ने एक रिपोर्ट थी।

इसके बाद सरकार ने संशोधन विधेवक में कुल नौ संशोधन पेल कर लोकसभा में पारित करवाए। समिति ने रिपोर्ट में कुछेक व्यावहारिक समस्याएं गिनाई थीं। दरअसल, देश की 60 प्रतिशत से अधिक जनता खेती पर निर्भर है, जिसकी देश की सकल घरेलू उत्पादन में मात्र 13 प्रतिशत भागीदारी है। पू-स्वामी की औसत भूमि कर पट्टा बहुत छोटा हो गया है, जो व्यापारिक खेती के लिए पर्याप्त नहीं है। इन सब लोगों को वैकल्पिक रोजगार के संसाधन ढूंढ़ने पढ़ेंगे। साथ ही यदि इनको भूमि की कीमत सही नहीं मिली तो परिस्थिति विफ्ट हो जाएगी। अधिग्रहण से कम से कम उसका मूल्य ठीक-ठाक मिल जाता है। साय हो जिस क्षेत्र में आधारभूत ढांचे का निर्माण होता है, उसके आस-पास की भूमि के दाम भी बढ़ जाते हैं। यह समहाना होगा कि भू-अधिग्रहण के बाद ही तो देश के सभी कोने में आधारभूत संरचना को तैयार किया जा सका है।

अगर इन संशोधनों को हम बारीकी से देखें तो पता चलेगा कि लोगों की चिंवा भूमि अधिग्रहण कानून में भू-स्वामी की सहमति से जुड़े एक क्लॉज को लेकर थी, जिसे भाजपा ने हटा दिया। भूमि अधिग्रहण बरनून 2013 के बारे में सभी की मान्यता है कि यह किसानों के हित में है। यह जानना आवश्यक है कि उसमें भी सरकारी परियोजनाओं के लिए भू-स्वामी की सहमति का बलॉज नहीं था। केवल दो प्रकार के अधिग्रहणों के लिए किसानों की सहमति की बात थी। पहला अगर सरकार पब्लिक प्राइवेट पार्टनरशिप (पीपीपी) परियोजना के लिए भूमि अधिग्रहित करती है तो 70 प्रतिशव भू-स्व्वामियों से सहमति लेने की आवश्यकता थी। अगर सरकार किसी प्राइवेट परियोजना के लिए भूमि अधिग्रहित करती है वो 80 प्रतिशत भू-स्यामियों की सहमति की जरूरत थी। इसके अतिरिक्त यदि सरकार अपने लिए लगभग नौ क्षेत्र की परियोजनाओं में किसी भूमि पर अधिग्रहण करती तो उसमें सहमति वाले क्लॉज नहीं थे। यह अधिधाहण सरकारी परियोजना के लिए था, जिसमें किखनों की सहमति की आवश्यकता नहीं थी। पुराने कानून के नौ क्षेत्र जिसमें सहमति जरूरी नहीं थी, उसमें अब सरकार ने केवल पांच आवश्यक क्षेत्रों को रखा है।

बगैर सहमति के भूमि अधिद्याहित किए जाने वाले जो पांच क्षेत्रों को जोड़ा है, उसमे आधारभूत संरचना, औद्योगिक क्षेत्र के विकास जैसे को शामिल किया गया है। इसमें सरकार ने कहा है कि औद्योगिक क्षेत्र के दोनों तरफ एक-एक किलोमीटर से ज्यादा क्षेत्र अधिग्रहित नहीं किया जाएगा। ‘पीपीपी’ परियोजना में भूमि का स्वामित्व सरकार के पास ही रहेगा, उसमें भी सामाजिक ढांचागत परियोजनाओं के लिए भूमि अधिग्रहित करने का अधिकार सरकार ने अपने पास से हटा लिया है। निजी अस्पताल और निजी शिक्षण संस्थाओं के लिए भूमि अधिग्रहित नहीं की जाएगी। वे सुझाव हमें मिले थे, जिसे सरकार ने माना भी है। मुआवजे की रकम मिलने में वर्षों लग जाते हैं, ऐसी समस्या भी सामने आई। इससे निपटने के लिए जिला स्तर पर समाधान केन्द्र स्थापित करने की यात को सरकार ने माना। इस तरह ज्यादातर सुझावों को सरकार ने मान लिया है। जब इस बिल को लोकसभा में आया गया था, तब राष्ट्रीय जनतांत्रिक गठबंधन के कुछ घटक दान भी इसके पक्ष में नहीं थे, लेकिन उनके सुदयवों को शामिल किया गया। मुझे लगता है कि राज्यसभा में आने तक राजग के घटक इसके पक्ष में तो आ ही जाएंगे। अन्य राजनीतिक पार्टियों को भी सरकार के साथ आना चाहिए। ऐसे गंभीर मसले पर राजनीति साधना ठीक नहीं है, क्योंकि इससे देश का विकास बाधित होगा।

Outsourcing equals Globalisation

March 30, 2003

By Gopal Krishna Agarwal,

BUSINESS process outsourcing (BPO) helps in globalising national economies. Outsourcing depends on labour arbitrage and India is considered to be a major beneficiary of the process. In any field where knowledge is involved, it has the potential to become a global giant by leveraging the potential of its English-speaking, tech savvy and cheap manpower in the global market.

India’s IT market has grown from $1.73 billion in 1994-95 to $16.5 billion in 2002-03. The country’s software exports grew at 26 to 28 per cent during the current fiscal year ending March 2004. As if in response to this striking growth, we are suddenly hearing anti-globalisation noises from the West. Legislation has been introduced in the US seeking a clamp down on such outsourcing.

This attempt to ban outsourcing may also be a sign of weakening American confidence in the strength of its dollar. The US has been running up a higher and higher deficit which has crossed half a trillion dollars this year. Earlier, this was being financed by at- tracting global currency reserves. The central banks of nations the world over were keeping their cur rency reserves in dollars, thereby fuelling the demand for that currency. But with the weakening of the dollar, this could change.

Experts in the US realise, how ever, that banning outsourcing can be no solution to the economic and employment crises the nation is facing. Even Alan Greenspan, the chairman of the Federal Reserve, has pointed out that efforts to protect US jobs through legislation could end up damaging the economy. He has stated that if the US opts to erect walls against foreign trade and even discourage job-displacing innovation, it could slow the pace of its economic growth markedly. In any case, US companies have little choice. If they don’t cut costs by outsourcing they will rapidly become uncompetitive, vis-a-vis companies that do, which will result in many more US jobs being lost as an increasing number of these companies will be forced to shut down.

The world outsourcing market is estimated to be about $5 trillion in 2002 according to the – Outsourcing Research Council. Nearly 20 per cent of the total business is constituted by the IT E and ITES market, which is growing at about 15 per cent per annum. Of this, India receives only about 2 per cent of the work generated. This indicates the huge ■ potential it has of future growth. However, in a simultaneous reverse process, some of the best and biggest of Indian companies are outsourcing strategic IT functions to global companies.

Strategic outsourcing is, in fact, the fastest growing segment in the Indian IT markets as seen from the series of deals announced in the last few days. A notable deal struck in the recent past is that between Hewlett-Packard and Bank of India for over Rs 680 crores. It is also clear that global vendors have es- established their expertise and experience, in handling the long-term, complex outsourcing needs of Indian companies to enable business transformation. It is no coincidence that Indian companies are opting for strategic outsourcing at a time when the BPO phenomenon is at its peak. Indian non-IT companies are taking to outsourcing as they are on the lookout for vendors with the best domain knowledge. In simple terms, this is just another manifestation of globalisation.

Several high-profile visitors from the US have told us that India is one of the most closed economies in the world. This is partly an attempt to legitimise anti-outsourcing legislation in their country. The conventional test for gauging openness is tariff structures, on which India scores well as per WTO standards.

Americans were earlier in a position to win competition and control the economies of other nations through monetary policies devised by multilateral agencies like the IMF and the World Bank. When international trade agreements were extended to the agriculture and services sectors, developed nations were not very comfortable since they started losing out to the competition. At that point, they started taking recourse to anti-liberalisation measures like banning outsourcing. But there is a huge contradiction here. The US economy is based on accessing world markets. One cannot ban outsourcing of business process while continuing to access world markets.

The US cannot ban outsourcing while continuing to access world markets

The author is member, Central Economic cell, BJP