Anybody who comes on television says ‘there is a huge demand for infrastructure, so invest in infrastructure’ -brilliant argument, completely wrong.
Experts, if you have forgotten your basic Economics, here is the answer:
Demand = Need for a product + Ability to pay+ Willingness to pay.
Let us look at another product: Pensions.
Who needs it? All of us – above or below the poverty line. So invest in a company selling pension funds! Correct? Complete bull. UTI and Templeton have a pension plan – and they cannot sell. All insurance companies have pension plans…and they cannot sell (some people buy, but that is because the commissions are attractive for the sales man)….
So go to the basics. India needs infrastructure. Till we learn to pay for it, and pay a fair price for it, it is only ‘need’.
Look at education. There is ‘need’ and there is willingness (parents, albeit!) to pay for a MBA…so it is a Rs. 40,000 crore industry. So is there need for infra? yes. Is there need that all buildings over the age of 30 are demolished and rebuilt so that our cities look good? Yes. Is there need for more trains? Yes
Is there demand? NO. Not at fair prices (the provider has to make money after paying salaries, rent, interest, …etc.). Same as pensions.
So infra may not be a great investment……and why mutual funds and insurance companies will NOT MAKE MONEY for another 20 years HONESTLY selling pension schemes.
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