India Pakistan Comparison 2010

[ramu]

For the disillusioned :

Service Sector in India
=======================

Service sector is the lifeline for the social economic growth of a country. It is today the largest and fastest growing sector globally contributing more to the global output and employing more people than any other sector.

The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. Availability of quality services is vital for the well being of the economy.

In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment etc.

Indian Service Sector
In alignment with the global trends, Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times. The activities under the purview of the service sector are quite diverse. Trading, transportation and communication, financial, real estate and business services, community, social and personal services come within the gambit of the service industry.

One of the key service industry in India would be health and education. They are vital for the country’s economic stability. A robust healthcare system helps to create a strong and diligent human capital, who in turn can contribute productively to the nation’s growth.

Post Liberalization
The Indian economy has moved from agriculture based economy to a knowledge based economy. Today the IT industry and ITE'S industry are the dominant industry in the service sector. Media and entertainment have also seen tremendous growth in the past few years.

Subsectors

Information Technology Industry
The Information Technology industry has achieved phenomenal growth after liberalization. The industry has performed exceedingly well amidst tough global competition. Being knowledge based industry; India has been able to leverage the global markets, because of the huge pool of engineering talent available and the proficiency in English language among the middle class.

ITES sector
The ITES sector has also leveraged the global changes positively to emerge as one of the prominent industries. Some of the services covered by the ITES industry would be:
Customer interaction services -Non voice and Voice.
Back office, revenue accounting, data entry, data conversion, HR services.
Medical Transcription.
Content development and animation.
Remote education, market research and GIS
Retailing
Prior to liberalization, India had one of the most underdeveloped retail sectors in the world. After liberalization the scenario changed dramatically. Organized retailing with prominence on self service and chain stores has changed the dynamics of retailing. In most of the tier I and tier II cities supermarket chains mushroomed, catering to the needs of vibrant middle class. This indirectly contributed to the growth of the packaged food industry and other consumer goods.

Financial Services-Banking And Insurance
Prior to liberalization these two sectors were controlled and regulated by the government. Nationalized banks and insurance companies had a firm grip over the market. After liberalization the banking and insurance domain opened up for private participation.

Banking Sector
The three major changes in the banking sector after liberalization are:
Step to increase the cash outflow through reduction in the statutory liquidity and cash reserve ratio.
Nationalized banks including SBI were allowed to sell stakes to private sector and private investors were allowed to enter the banking domain. Foreign banks were given greater access to the domestic market, both as subsidiaries and branches, provided the foreign banks maintained a minimum assigned capital and would be governed by the same rules and regulations governing domestic banks.
Banks were given greater freedom to leverage the capital markets and determine their asset portfolios. The banks were allowed to provide advances against equity provided as collateral and provide bank guarantees to the broking community.
Insurance Sector
The Insurance Regulatory and Development Authority Act 1999 (IRDA Act) allowed the participation of private insurance companies in the insurance sector. The primary role of IRDA was to safeguard the interest of insurance policy holders, to regulate, promote and ensure orderly growth of the insurance industry. The insurance sector could invest in the capital markets and other than traditional insurance products, various market link insurance products were available to the end customer to choose from.

Some of the prominent insurance companies are:
Bajaj Allianz Insurance Corporation
Birla Sun Insurance Co Ltd
HDFC Standard Insurance Co Ltd
ICICI Prudential Insurance Co Ltd
Max New York Insurance Co Ltd
Tata AIG Insurance Co Ltd
Future Trends
Globally outsourcing industry would continue to grow.
Following the success of US and UK, more countries in the European Union would outsource their business.
Technological power shift from the West to the East as India and China emerge as major players.
Political backlash over outsourcing would come down as companies reap the benefit of outsourcing.


Service Sector in India - Service Industry India, Indian Service Sector

 

[Hutchroy]

IN every case, lofty valuations exceeding GDP are not sustainable as we saw in the last decade even in America where MNCs dominate the markets.

India runs large trade deficits. On paper, the US does too, but the US case is very special. US trade deficit is highly exaggerated a the US GDP is significantly underestimated.

Reserve Bank of India

No. 41: India's Overall Balance of Payments April – December 2009

A : Total Current Account : US Dollars 30.330 Billion

B : Total Capital Account. : US Dollars 43.207 Billion

C : Errors and Omissions : US Dollars 01.577 Billion

D : OVERALL BALANCE : US Dollars 11.300 Billion

There, you have it!

 

[karan.1970]

There is a long history of connection between Market Caps and GDPs..and the lesson it offers is that peaks when market cap exceeds national gdp are followed by market crashes.

Take a look at this: Google - public data

I find this theory a little convulated since there really is no linkage between the GDP of a country and the market cap of its publically listed companies since the total market cap of public companies also depends on the % of GDP producing companies listed on the stock exchange. For example in a country like Pakistan where secondary equity markets are not well developed and the total value of publically listed companies is significantly lower than total value of privately held companies, this ratio will always be very low.

On the other hand, in a place like USA, where most companies dream to get publically listed, a higher % of companies are publically listed and hence this ratio will always be higher..

even in the attached diagram, in 2000 when US markets crashed at MCAP = 175% of GDP, they stopped crashing and started rising at 110% of GDP. If MCAP > 100% GDP is a driving factor, they should then have crashed further to establish equilibrium..

Also US MCPA stayed over 100% for 11 years in a row between 1996 and 2007 without coming lower than 100% gdp even once...


I personally think this is a pure case of confusing correlation with causation.

 

[Agni 5]

Pakistan companies are higher standards thats why a single pakistani company is not listed in Nasdaq.

Only pakistan based IT company netsol which is blue chip company in KSE is penny stock in USA.

Market cap is whooping 30 million. Normally it is bonus amount for some lower level executive.

 

[ramu]

Pakistan companies are higher standards thats why a single pakistani company is not listed in Nasdaq.

Only pakistan based IT company netsol which is blue chip company in KSE is penny stock in USA.

Market cap is whooping 30 million. Normally it is bonus amount for some lower level executive.

Oh that is because of an international conspiracy to undermine Pakistan. The members in this forum will do everything but self introspection.

 

[RiazHaq]

Reserve Bank of India

No. 41: India's Overall Balance of Payments April – December 2009

A : Total Current Account : US Dollars 30.330 Billion

B : Total Capital Account. : US Dollars 43.207 Billion

C : Errors and Omissions : US Dollars 01.577 Billion

D : OVERALL BALANCE : US Dollars 11.300 Billion

There, you have it!

Please don't confuse the issue I brought up. There is a big gap between exports and imports in India. It relies much more on foreign investments for growth than Brazil, Russia and China. Its biggest real export is its people who send home significant remittances from the Middle East, Europe and US.

The trade deficit for April 2009- February, 2010 was estimated at US $ 95418 million which was lower than the deficit of US $ 114721 million during April 2008 -February, 2009

Department of Commerce, Government of India

Besides, India also runs huge budget deficits of greater 5% of its GDP.

 

[RiazHaq]

I find this theory a little convulated since there really is no linkage between the GDP of a country and the market cap of its publically listed companies since the total market cap of public companies also depends on the % of GDP producing companies listed on the stock exchange. For example in a country like Pakistan where secondary equity markets are not well developed and the total value of publically listed companies is significantly lower than total value of privately held companies, this ratio will always be very low.

On the other hand, in a place like USA, where most companies dream to get publically listed, a higher % of companies are publically listed and hence this ratio will always be higher..

even in the attached diagram, in 2000 when US markets crashed at MCAP = 175% of GDP, they stopped crashing and started rising at 110% of GDP. If MCAP > 100% GDP is a driving factor, they should then have crashed further to establish equilibrium..

Also US MCPA stayed over 100% for 11 years in a row between 1996 and 2007 without coming lower than 100% gdp even once...


I personally think this is a pure case of confusing correlation with causation.

The US ratio of market cap to gdp is a little misleading because the US GDP is significantly underestimated, as I explained earlier. It's very different from the case for India where MNCs contribution to Indian GDP is insignificant.

 

[Agni 5]

Oh that is because of an international conspiracy to undermine Pakistan. The members in this forum will do everything but self introspection.

I live in USA. If pakistan market KSE has so much potential, why there is not a single pakistan specific mutual fund of ETF.

I watch regularly CNBC. I have not heard a single word on KSE. Pakistan name is specified if the topic is terrorism or AID.

World markets did not care when pakistan was about to default unlike greece.

 

[James007]

I live in USA. If pakistan market KSE has so much potential, why there is not a single pakistan specific mutual fund of ETF.

I watch regularly CNBC. I have not heard a single word on KSE. Pakistan name is specified if the topic is terrorism or AID.

World markets did not care when pakistan was about to default unlike greece.

in asia even it is same

 

[RiazHaq]

I live in USA. If pakistan market KSE has so much potential, why there is not a single pakistan specific mutual fund of ETF.

I watch regularly CNBC. I have not heard a single word on KSE. Pakistan name is specified if the topic is terrorism or AID.

World markets did not care when pakistan was about to default unlike greece.

It's only because you see what you want to see and hear what you want to hear. There are many ways of investing by foreigners in Pakistan. And KSE has been outperforming BRIC markets for over a decade, including in the period so far in 2010.

Goldman Sachs, credited with coining BRIC and N11, has included Pakistan in N11 group.

And major business publications such as Wall Street Journal, Businessweek and Economist carry information about KSE performance and Pak economy. There is also a CNBC Pakistan channel that covers it.

If you are serious about learning, please visit

South Asia Investor Review

 

[ramu]

It's only because you see what you want to see and hear what you want to hear. There are many ways of investing by foreigners in Pakistan. And KSE has been outperforming BRIC markets for over a decade, including in the period so far in 2010.

Goldman Sachs, credited with coining BRIC and N11, has included Pakistan in N11 group.

And major business publications such as Wall Street Journal, Businessweek and Economist carry information about KSE performance and Pak economy. There is also a CNBC Pakistan channel that covers it.

If you are serious about learning, please visit

South Asia Investor Review

You have failed your own logic and have tried to argue with irrational and non coherent analogies and fringe examples like Satyam. Today Mahindra Satyam after the Raju extravaganza is worth a fortune. You conveniently forget Enron and when asked for an explanation on your trust in GDP bring up sector wise breakup. Now, KSE is the best and BSE is bloated is your theory. Good going !

 

[Hutchroy]

Please don't confuse the issue I brought up. There is a big gap between exports and imports in India. It relies much more on foreign investments for growth than Brazil, Russia and China. Its biggest real export is its people who send home significant remittances from the Middle East, Europe and US.

The trade deficit for April 2009- February, 2010 was estimated at US $ 95418 million which was lower than the deficit of US $ 114721 million during April 2008 -February, 2009

Department of Commerce, Government of India

Besides, India also runs huge budget deficits of greater 5% of its GDP.

India will have earned US Dollars 50 Billion or so by way for Software & ITeS-BPO along with about US Dollars 55 Billion in Remittances from Indians working overseas keeps the Indian Total Exports-Imports Balance in the Black.

Indian Budgetary Deficits are managed without having to resort to “Help” from US, IMF, WB, UK, Germany, France, SA, UAE, Kuwait, China, Japan etc. etc.

Any how India cannot be compared with China but comes up with Flying Colours when its Western Neighbour wishes to play the "I am your Equal" Game

 

[TechLahore]

Pakistan companies are higher standards thats why a single pakistani company is not listed in Nasdaq.

Only pakistan based IT company netsol which is blue chip company in KSE is penny stock in USA.

Market cap is whooping 30 million. Normally it is bonus amount for some lower level executive.

Netsol is not blue chip. Netsol is also not even close to being the largest Pakistani company. Just goes to show that listing on the NASDAQ doesn't mean a company is a top performer or the "largest".

Aside from the US market, a huge number of Pakistani companies are active in the UAE, over 6,000, in fact.

6,000 Pakistani companies operating in the UAE. Pakistanis have invested 6.7B Dirhams in Dubai real estate. | TechLahore

Post 1998 and sanctions etc. I don't think many business men from Pakistan have looked at the US as a safe destination for their capital. On the other hand, in the UK, there are several large Pakistani companies, for example, the Billionaire, Sir Anwer Pervez' Bestway Group:

Anwar Pervez - Wikipedia, the free encyclopedia

Pakistani companies such as OGDC, PTCL, PSO, Nishat Group etc all have billiion+ $ market caps even though they are grossly undervalued. If you apply South Asian average P/Es to the KSE, you will see that a significant number of Pakistani companies (including the above named) will automatically exceed the Fortune 2000 threshold. In fact, several of them are/have been on the list in the past.

Coming to IT, since you used the Netsol example, one of Pakistan's bigger tech companies, Wordcall, sold roughly half the equity in some of its operations (they have several subsidiaries) to OmanTel for almost $300M. It's current estimated valuation is between $650 and $1B.

Wateen Telecom is another tech company which recently IPO'd and has a valuation in the hundreds of millions of dollars. The Warid/Wateen consortium easily crosses a billion.

 

[ramu]

Tech Lahore before you jump up to add your 2 cents, I would like to know your views about Riaz's argument.

1. Indian markets are bloated and overpriced. A correction waiting to happen.

2. The accounting system of Indian companies is a gimmick.

3. The market cap to GDP of India is equal to unity and thus overpriced.

Thanks in advance

 

[TechLahore]

Reserve Bank of India

No. 41: India's Overall Balance of Payments April – December 2009

A : Total Current Account : US Dollars 30.330 Billion

B : Total Capital Account. : US Dollars 43.207 Billion

C : Errors and Omissions : US Dollars 01.577 Billion

D : OVERALL BALANCE : US Dollars 11.300 Billion

There, you have it!

Perhaps some more information will help here:

This is not a good time for Pakistan's economy. However, compared to Pakistan's worst position in 10+ years, India still runs a larger budget deficit as a percentage of GDP.

Moreover, look at long term Gov bond yields. Even in Pakistan's weakened economic state, the GoI and GoP are offering the same incentive for long term borrowing.