Editorial “We are experiencing not only a great convergence in material well being, but also in our values and aspirations”. One of the best lectures in the last few years, hope you will enjoy going through it We may not be aware of it. But many things are changing for the better. Something important and which has been expected for quite some time is the one relating to the creation of a public debt management office of the Government of India. Presently, the RBI runs the Public Debt Office which actually manages the operational aspects of the issue and servicing of government debt. As you may be aware the most powerful transformation that we saw in the domestic markets was the introduction of market determined yields on government securities’ auctions through a process of competitive bidding. This emerged from the first round of reforms that the domestic economy and markets had gone through in the very first phase of economic reforms and liberalisation. Both the Urjit Patel Committee and the Interim Budget have made a mention of the likely birth of the new institution, that is, an independent Public Debt Management Office of the Government of India, very soon. This is likely to bring about major changes in the way we formulate policies in the monetary space, as policies would be free now of the delicate awareness of what those policies would mean for government’s borrowing programme. This may also present new opportunities for market participants including brokers and wealth management companies. The Exim Bank Commencement Day Lecture was on “The Great Convergence, Can India Make it?” by Prof. Kishore Mahbubani. Prof. Mahbubani has an entirely different world view and that too a realistically optimistic one. He says about his work, The Great Convergence, “is one that runs against the current zeitgeist of pessimism in the world today. This Is a golden era in human development, even compared to the state of the world just a few decades ago”. He believes that “we are experiencing not only a great convergence in material well being, but also in our values and aspirations”. One of the best lectures in the last few years, hope you will enjoy going through it. In the current issue we have two very informative articles, one on online investing and another one on goal based investing. These are themes relevant to investors at all times especially if they are at the starting point of their investment cycle. We close the issue with a beautiful write up on the many beautiful things in Bhandardara, a location so blessed by nature with its very unique beauty and tranquility. It will be a good idea to visit the place once before the footfalls rise beyond the capacity of its tiny roads. Happy Investing. Joseph Thomas FEBRUARY 2014 Investime 03 CONTENTS 06 06 The Great Convergence: Can India Make It? The Great Convergence, is one that runs against the current zeitgeist of pessimism in the world today. This is a golden era in human development, even compared to the state of the world just a few decades ago 10 Now just go click click and invest online 10 in minutes As the world advanced, so did technology! While the digital revolution took the banks and retail stores online, people realised the convenience of taking their everyday chores online (from shopping to managing bank accounts and the likes) 12 12 Planning your Life Stage Milestones As we move ahead in life our goals, dreams and aspirations keep changing. The question that arises is: have we made enough provisions to achieve these goals? 36 Interim Budget for 2014-15 Key Highlights India’s economy, in terms of the size of its GDP, is the 11th largest in the world. We therefore owe a responsibility not only to ourselves, but to the whole world, to keep our economy in robust health 36 38 The Last Page Bhandardara: In the foothills of Sahyadri Ranges, Team outings have always been an integral part of corporate life and have gone a long way in fostering unity and mutual understanding amongst all 38 Cover Page Printed, published and edited by Mr. K. Joseph Thomas on behalf of Aditya Birla Money Mart Limited. (Formally known as Birla Sun Life Distribution Company Limited). Published from One India Bulls Centre, Tower 1, 14th Floor, Jupiter Mill Compound, 841, Senapati Bapat Marg, Elphinstone Road, Mumbai 400 013. Tel no: 91-22-4356 8300 Fax no: 91-22-4356 8310 and printed at Spenta Multimedia, Have you Peninsula Spenta, Mathuradas Mill Compound, N. M. Joshi Marg, Lower Parel (W), Mumbai - 400 013. Tel. : 2481 1010. www.spentamultimedia.com planned For advertisement and subscription contact: Mridul Shukla Email: [email protected] right for Designed and printed at Spenta Multimedia Photo: www.dreamstime.com & www.shutterstock.com the future? DISCLAIMER CLAUSE The information published is as per the data provided by various Mutual Funds. While utmost care has been taken to maintain accuracy in the data, the company does not hold any responsibility for errors in the same. The views/opinions expressed in the various articles are that of the author and the company may not subscribe to the same either in part or in full. Any person investing on the basis of the data published in Investime will be doing so at their own risk. Feature The Great Convergence, is one that runs against the current zeitgeist of pessimism in the world today. This is a golden era in human development, even compared to the state of the world just a few decades ago By Prof. Kishore Mahbubani THE GREAT CONVERGENCE: Can India Make It? L adies and gentlemen, it is a great states involved in civil war will decline history, which has had and will continue honor to address you this evening. from 15 per cent in 2009 to 7 per cent to have enormous ramifications for our Let me begin my remarks by in 2050. If you are interested in this, world. Again, however, this massive emphasising that, unlike many of my Steven Pinker’s book The Better Angels transformation has not been taking esteemed predecessors at this lecture, of Our Nature presents a comprehensive, place as quickly in India. As of 2010, I am not a professional economist. My rigorously researched case for the overall India’s middle class numbered 69.17 expertise is in internationalrelations and historical decline of violence in our world. million people, or less than 6 per cent geopolitics, two areas which are deeply Similarly, absolute global poverty of the total population. By contrast, the impacted by trade and economics. The is also waning. The halving of global size of China’s middle class is currently same applies vice versa. Hence, I hope poverty is one of the few Millennium estimated to be more than 300 million, to speak to you today about how the Development Goals (MDGs) that will be or about the size of the entire population interplay between today’s geopolitical met on time. In fact, it was accomplished of the United States. and economic conditions have led to in 2010, five years ahead of schedule. These trends are rapidly closing the what I call the “great convergence — a The US National Intelligence Council gap between the West and the rest, concept Irecently wrote a book about. I also predicts that global poverty will reversing what Samuel Huntington called will also discuss how India is positioned be virtually eliminated by 2030. This the “great divergence,” when the West in this great convergence. My lecture this dramatic reduction in poverty has surged ahead of Asian countries with evening will comprise three parts: I will yielded immediate and tangible results. the Industrial Revolution. But, we are not first attempt to concisely descri Global infant mortality rates have only experiencing a great convergence be the great convergence. Then, I drastically declined from 63 deaths per in material well-being, but also in our will discuss why I believe it is taking 1,000 live births in 1990 to 35 deaths values and aspirations.All around the place now, and to conclude, I will per 1,000 births in 2012. Unfortunately, world, people want essentially the same talk about India’s opportunities in India’s record has not matched global things: to rise to a middle class standard the great convergence. performance. India’s poverty rate has of living or above, for their children to My book, The Great Convergence, only been reduced by 36.3 per cent as of be educated, and to live without threat is one that runs against the current 2010, and the World Bank projects that of violence conflict. This has created a zeitgeist of pessimism in the world India will be a few years late in halving it. greater sense of understanding among today. This is a golden era in human India’s infant mortality rate is likewise peoples of different cultures and even development, even compared to the much higher than the global average, civilisations. This is what the great state of the world just a few decades with 43.8 deaths per 1,000 live births. convergence is all about. I specifically ago. This assertion has generated a lot of Let me now give you a statistic that suggest in my book that humanity controversy but the data backs it up. Far will be the most important thing to is converging around, what I call, a less people are dying in interstate wars take away from this lecture: in 2010, “consensual cluster of norms.” These today, compared to any period in human there were 850 million people in the are: modern science, logic, free market history. In the 1950s, there was an global middle class. By 2020, the middle economics, the social contract and average of six interstate wars per year; in class will number 3.2 billion and 4.9 multilateralism. the first decade of the new millennium, billion by 2030. In Asia alone, the middle I don’t think I need to remind you the average per year has declined to class is expected to triple from 500 that India is excelling in modern science. just one.The average number of battle million in 2010 to 1.75 billion by 2020, Indian students earned 24,800 science deaths per conflict in the post-Cold War accounting for 85 per cent of global and engineering degrees in the United period is 76 per cent lower than during growth. Half of the global middle class States between 1989 and 2009, the the Cold War. In terms of internal armed will be Asian in 2020, and almost two second largest number awarded to conflict, the Peace Research Institute thirds in 2030.This is an extraordinary foreign students. India also outranks in Oslo projects that the proportion of development unprecedented in human the United States, Japan and China in 06 Investime FEBRUARY 2014 the number of science and engineering Though tensions were running high on Mao Zedong, Park Chung-hee or Joseph graduates it produces each year, with either side, leaders of both sides were Stalin.The swelling ranks of the educated 690,000 maths and science students very calm and pragmatic middle class demand more of a voice graduating in India every year. India has in their efforts to defuse the situation. In their governments now, and want to Saraju Rath, “Scientific instruments Far too much is riding on the partake in the policy process instead in pre-modern India and the global China-1ndia relationship to risk an of simply reaping or tolerating policy circulation of knowledge,” lnternational outbreak in violence. Bilateral trade in results. More and more societies and Institute for Asian Studies newsletter 2013 was valued at $65.47 billion and governments are accepting the rules of (2008).(http://www.iias.nVsites/default/ there Is a rising number of issues in the social contract. We saw this in the flles/IIAS_NLS6_32.pdf.), the second which both countries have common Arab spring protests in the Middle East largest pool of scientists and engineers, interests, such as the situation in and North Africa two years ago, and and the second largest number of Afghanistan, International terrorism and we see it in less dramatic cases, like trained doctors in the world. climate change. the growing role of opposition parties Steven Pinker’s book, The Better The third norm is free market even in Malaysia and Singapore where Angels of Our Nature, which I economics. The end of the Cold War may the ruling parties have been in power mentioned earller, suggests that not have seen the end of history, but it since independence. The election of the the decline of violence can be partly symbolised the triumph of free markets Aam Admi Party into power in the Delhi attributed to what he calls the “escalator over planned economies. Now, with the legislative assembly elections last year of reason,” which takes us away from exception of North Korea, no country perfectly demonstrates the strong new violent impulses due to an ability to in the world denies that free markets demands for more open and transparent empathise and identify with people, promote growth and development. The governance. Even in China, a one-party even from other countries and cultures. Indian economy got a huge much-needed state, the new leadership is taking The world wide web has done much to boost after the liberalising reforms deliberate steps to reform its image facilitate this. When Chilean miners that the Narasimha Rao government in the eyes of the public. For instance, were trapped underground for 69 days in implemented following the 1991 President XiJinping has banned lavish 2010, an astounding one billion viewers economic crisis. In 1992, GOP per capita state banquets, and has even gone so watched the rescue live on TV and the shot up by 12.8 per cent. China, which far as to specify the number of courses Internet. The proliferation of American- has taken its liberalisation reforms for official meals: four courses and a style MBAs among policymakers and begun by Deng Xlaoplng much further, soup. He has banned shark’s fin, saving business leaders around the world, has saw its GOP growth rate grow from an many sharks (an endangered species created a common language and set of average of 5.3 per cent in the period of on our planet). This attention to public values among elites. We saw how our 1960 to 1978, to a 9.41 per cent average opinion is an implicit recognition by the interdependence and connectivity can in 1979 to 1998. Communist Party that it needs public help prevent conflict when we witnessed I have noted in my previous speeches consent in order to survive. the flare-up In the border dispute and articles that the era of strong The final norm is multilateralism. Our between China and India last year. leaders is over. We will never get another gravest problems today are transnationaI FEBRUARY 2014 Investime 07 in nature, from pandemics to climate In the United States, where scientists, middle of its demographic dividend. change, from international terrorism engineers and entrepreneurs from Yet the economy is floundering despite to financial crises. This has led to a all over the world, compete with each an abundance of young people in the proliferation of multilateral initiatives other on a level playing field, Indians labour force. According to the 2011 at both the regional and global level in consistently come out on top. Indians census figures, India’s working age acknowledgement that transnational in the United States have the highest population is now 63.4 per cent of India’s problems will require transnational per capita income of every other ethnic total popluation. China is even exiting cooperation. One key outcome from group, earning $37,931 annually in 2010, its own demographic dividend as India all of these forums and meetings is compared with the American national has entered it, creating an even larger that civil servants and government average of $26,708. If Indians in India opportunity for India to lure investors leaders meet more often and have could achieve only half of the per capita from China. Yet, foreign investors have more opportunities for discussion and income of Indian immigrants in America, preferred Bangladesh and Vietnam compromise, which also engenders India’s GOP today would be $24.65 trillion for manufacturing. The Philippines, greater trust among policymakers. For instead of $1.85 trillion. Italy, which has a country with less than 8 per cent of example, the Association of Southeast 5 per cent of India’s population, has a India’s population, has more workers Asian Nations (ASEAN), the second most larger GOP. than India in its rapidly growing and successful regional organisation after India’s full participation in the great highly lucrative business process the European Union, has created several convergence is dependent on serious outsourcing industry. offshoot regional institutions such as the readjustments among the Indian policy- For India to take full advantage of the East Asia Summit, the ASEAN Regional making and business elite. Pratap Bhanu great convergence, it needs to leverage Forum, ASEAN+3 and ASEAN+8 groupings Mehta, one of India’s leading intellectuals, certain assets it possesses that it is which bring countries in the Asia Pacific spoke bluntly when he said that China has currently squandering. The first asset “ THE SWELLING RANKS OF THE EDUCATED MIDDL“E CLASS DEMAND MORE OF A VOICE IN THEIR GOVERNMENTS NOW, AND WANT TO PARTAKE IN THE POLICY PROCESS INSTEAD OF SIMPLY REAPING OR TOLERATING POLICY RESULTS together every year. These include major a closed society but an open mind, while is its massive and highly successful powers such as the United States, China India has an open society but a closed diaspora.The combined wealth of Indians and India. mind. China may be a one-party state abroad is about $1trillion, or about half These are all extraordinary with limited freedom of expression but its of India’s total GDP. While India is the developments occuring at breakneck leaders are pragmatic and open-minded, largest recipient of overseas remittances, speeds. Never before have so many an attitude summed up neatly by Oeng with a total of $70 billion flowing into people risen out of grinding poverty Xiaoping’s famous saying that it does not the country in 2013, the Indian diaspora’s so quickly and never before have so matter whether a cat is black or white, so contribution to the Indian economy many people been so well-educated long as it catches mice. India on the other cannot be merely financial. India’s or so well-travelled. These conditions hand is famed for its lively democracy and diaspora represents an immense store create enormous opportunities for energetic debates, like Amartya Sen’s The of human capital. In the United States, canny businesses and policymakers. Argumentative Indian. However, India Indians have founded 18 per cent of all In my book, The Great Convergence, I is still clinging onto some outdated and technology and engineering startups wrote about N. R. Narayana Murthy’s misguided economic concepts, which nationwide, while comprising less than 1 lnfosys, one of the pioneers of India’s has unfortunately made it into one of the per cent of the total U.S. population. 14 booming outsourcing business, and more ideologically hidebound societies in per cent of all Silicon Valley companies Vinod Khosla’s Sun Microsystems. I the world. So-called conventional wisdom are founded by Indians. Several top have written about the wide disparity goes unchallenged to the detriment of American business school shave Indian- between India’s potential and its actual lndia’sgrowth. born Deans, including Nitin Nohria at the performance, and it could not be clearer One of my greatest fears for India is Harvard Business School, Sunil Kumar at when you compare the innovation that it will sail right through the golden the University of Chicago and Soumitra and the quality of India’s companies opportunity that the great convergence Dutta at Cornell.Dipak C. Jain, possibly and entrepreneurs with the country’s represents, without taking advantage the first Indian to head an American economic performance. of it. At the moment, India is in the business school, was Dean of the Kellogg 08 Investime FEBRUARY 2014 School at Northwestern University for 13 other businesses as well, bringing down The bottom line of all this analysis years, before becoming dean of INSEAD operating costs. is that India remains a country with from 2011 to 2013. The second major asset India possesses enormous potential. Indeed, India may Persuading these hugely successful is its favourable standing in the eyes well be the number one country in the and innovative business people that of the international community. Unlike world in terms of the gap between its India sorely needs to come back home China, whose rise has been generating potential and its performance. after having experienced state-of the-art deep concern in the West, India has good McKinsey recently published a facilities and lavish public and venture relations with most of the world. In fact, as volume entitled Reimagining lndia capitalist funding, not to mention the the recent visits of President Park Geun- (McKinsey and Company,http:// polltlcal and legal institutions that hye of South Korea and Emperor Akihito www.mckinsey.com/features/ create space for businesses to flourish, and Prime Minister Shinzo Abe of Japan relmaglnlnLindia_book.). In this volume, will be no easy task. In 2013, for the to India have shown, China’s diplomatic I published an essay that said that if third consecutive year, India fell in challenges are presenting new valuable the average Indian could achieve a per the World Economic Forum’s Global opportunities for India to strengthen capita income that was half that of the Competitiveness Index rankings, slipping relations with its partners. average Indian in the United States, to the 60’ hspot out of 148 economies The third major asset India has is the India would have a GOP that would from the 59’ hspot the year before. While remarkable skill of its economists and be $25 trillion instead of the current India did well in the indicators that were policymakers, which has no equal any $2trlllion. based on its sheer size, such as GOP where in the world, except perhaps in Given this massive potential that in purchasing power parity terms and Singapore. The Indian government is filled India has, and the enormous surge made domestic market size, it did very poorly with world class economists, including by many developing countries in the in the policy-related aspects, coming in Prime Minister Dr. Manmohan Singh and past three decades as part of the great “ “ THE THIRD MAJOR ASSET INDIA HAS IS THE REMARKABLE SKILL OF ITS ECONOMISTS AND POLICYMAKERS,WHICH HAS NO EQUALANY WHERE IN THE WORLD, EXCEPT PERHAPS IN SINGAPORE 128th in total tax rate and trade tariffs, Planning Commission Deputy Chairman global convergence, the time has come for instance. Indians have long proven Dr. Montek Singh Ahluwalia. Reserve Bank for Indian policymakers and the Indian that they are globally competitive of India Governor Dr. Raghuram Rajan public to work out a new consensus on overseas, and it is time that they famously predicted the 2008 financial the steps that India can and should take are given the opportunity to prove crisis, though his warnings fell on deaf to return to the rates of 7 to 9 percent themselves on their own turf against ears. Dr. Kaushik Basu, Dr.Raghuram annualgrowth that India enjoyedIn foreign companies. Rajan’s predecessor as the Indian recent years. We are already seeing the strength government’s chief economic advisor, is The biglesson I learned from working of Indian companies in certain industries. now the World Bank’s chief economist. with Singapore’s founding fathers, After just five years in the smartphone This list goes on and on. However, Indian including Mr. Lee Kuan Yew and Mr.Goh business, Micromax has the second pollcy makers are constrained by gridlock Keng Swee, is that to succeed, you must largest market share in India and politics that has paralysed economic believe in yourself and you must be is rapidly gaining on Samsung, the growth. In 2012, The Economic Times willing and able to learn from others. number one smartphone brand. Indeed, found that large Indian multinationals had Many Indians have demonstrated that Micromax has already expanded into enough cash on their books to fund huge they can do both. The time has therefore other South Asian countries and even infrastructure projects, the equivalent come for India to seize this propitious into Russia. Airtel is the number one of building over 40,000 km of six-lane moment of history and propel the Indian mobile service provider in India, beating highways. Yet, that same year, private economy forward at an even faster pace. out Vodafone, a massive multinational. investment in India’s infrastructure India’s moment has arrived. Fierce competition among domestic declined by 52 per cent, resulting in companies and multinationals on a level costly delays in plugging India’s massive Professor Kishore Mahbubani, Dean playing field, in a notoriously price- infrastructure gap. Companies reported & Professor in the Practice of Public sensitive Indian market, can only mean reluctanee to invest due to slowing Policy at the Lee Kuan Yew School of the good news for not only consumers but growth exacerbated by policy paralysis. National University of Singapore FEBRUARY 2014 Investime 09 Feature As the world advanced, so did technology! While the digital revolution took the banks and retail stores online, people realised the convenience of taking their everyday chores online (from shopping to managing bank accounts and the likes) By Rahul Parikh Head – Aditya Birla Money MyUniverse GO CLICK CLICK AND Now just INVEST ONLINE in minutes T raditionally, Indians have been However, this has not resulted in wealth The pain points great savers and the growth of creation for many due to complexity Typically much of our savings finds the Indian economy has also and lack of awareness about financial their way into a fixed deposit that contributed to increasing household products and lack of complete view of hardly beats inflation and doesn’t incomes over the past decade. one’s finances. help much in wealth creation. Wealth 10 Investime FEBRUARY 2014