June IREF: On Productivity

Most Indian currently joining the work force in their millions are worth 20-25000 pm kind of white/blue collar jobs only, barring a small group of highly skilled workers who are exceptions and not the rule.

This kind of shift has two main features:

1. It is going to happen regardless of what mess the govt creates

2. Without massive training and retraining, these people will find it exceptionally difficult to move up the ladder.

Room for a lot of discontent here - in a few years, 20-25000 jobs will not satisfy this massive young population.

Expect fireworks in the 2014 and subsequent elections

This is the kind of disruptive new ways of doing things which can well upset the RE bubble cart. Good one.

It will become useful when people earning 20,000 Rs per month are able to work from home town. They are the ones who cant afford the city. 

Unfortunately, most of the tier 3 youngsters are technologically challenged and also cant do call center work because of poor English

If the very best earners leave the city, numbers will be too few and wont have impact.

But my experience is that city people need the city and feel upset with the lack of everything even while on holidays - how many times we scream that our iPad's network is poor - instead of leaving that thing behind at home?


think you are missing the main point.

In India we have two kinds of people - those earning 1-2 L (still middle class) and those earning 25-50.000 pm.

Those in the second group will have to struggle to buy own flat - whether they save up or whether they get EMI. This group are in the group where many of our fathers were - no matter how high a position they held, for them RE was always expensive

It is the first group that are unable to forget their past and keep buying RE - because of the special "attraction" which is a relic of the past hardships. Most of them already have one inherited home, those in their 40s would have already bought another - and still they are busy chasing after yet another flat - despite being professionals - and tying their life down to be EMI slaves.

They cause the bubble. If everyone bought one flat which fulfilled their needs, then why a bubble?

But think of people in the IT industry - all have 2-3 flats and have seen massive capital appreciation - and all they can think of is the next booking. They are unable to find anything better to do with their money - so they keep buying flats.

As for spoilt children - I meant that todays children are denied nothing and dont know the meaning of hardship. At least my generation had a very deprived childhood because our parents despite being good wage earners for their time, lived in the deprived 79s and early 80s. So we value small things and attach a "deprivation value" to a lot of things.

Our children with a more balanced upbringing do not do so. Unfortunately, they also dont learn the value of hard work as well as most of us did - this I have observed in all countries including developed countries.

Re: buying at 25 vs buying at 45 - if you buy at 25 the property appreciation is yours while the inflation is the banks. 

If you buy at 45, then property appreciaqtion someone else pockets while you bear the cost of inflation - a double whammy.

Only reason our parents did not use leverage was because it was too expensive at usurius rates in the 70s and 80s. The mortgage revolution is just 10-15 years old in India.

Unfortunately, if you are buying property at 2022 or 2032 valuation in 2012 - then you and the bank share the depreciation while the builder laughs all the way to the bank with both groups money - he has extracted the lions share for himself.





Actually our fathers scraped money from miniscule salaries, saved up and with great difficulty bought one flat.

Those days there were no home loans (24% ROI anyone?) and no reputable builders. The cost of the flat was some entire lifetimes savings. 

This thinking that flat is some much sought after and difficult to acquire thing of great value has seeped from our parents consciousness into our own.

Many people earning well cannot think of anything else to do with money - when we were children, we were taught not to waste and we cannot change our thinking. None of us have learnt the line which distinguishes waste from useful but big expenditure.

And alas, none of us knows at what price a flat becomes a wasteful expenditure - a humongous waste which puts all other wasteful expenditures into the shade. How can we - we have grown up thinking a flat is a mona lisa - priceless.

And so we keep piling on to more and more real estate and jewellery as if it is the purpose in life to acquire flats and plots and jewellery.

Our children, who we think we are spoiling - might grow up without these hangups and make more informed decisions on what is worth it and what is wasteful

I agree with your sentiments and much of your logic - though you have exagerated the numbers.

In the 1980s, we had 10% plus inflation, 15-17% interest for debentures, over 12% interest in bank FDs, 18% plus home loan rates. And amazing RE price inflation.

When same kind of horrible govt comes, with same stupid policies, why wouldnt we get the same results?

I do think rest of the 2 years of UPA2 will have some good policies. But much of the damage is already done.

India is currently not productive enough to get better salaries. Current levels will be static for maybe a decade - in fact Indians were getting overpaid when Rupee was strong, after 20% depreciation, we are correctly paid. Our productivity justifies only current salaries.


In other countries, big cities bring about massive increase in productivity with increased efficiency.

Indian cities are inefficient and dont do that. So although urbanization is happening increasingly, the limits of efficiency gains are being reached too quickly - making it easier to develop industry/services in tier 3 cities and towns because of better roads and telecom.

BJP ushered in both the telecom and road revolutions. Congress and socialists traditionally try to prevent this type of development. So in 8 years of Congress, both telecom and roads are being spoilt.

But people have tasted the improvements and I see all villages now developing on site without migrations regardless of Congress and socialist backwardisation.

The biggest asset in villages is land and it can be leveraged to increase productivity in many ways.



Indian sailors are in great demand by foreign vessels and might crew about 1/3rd of all sailors in the world (not sure)- we rank with norway in having largest numbers of sailors.

It is difficult to find a ship registered anywhere in the world, which doesnt have Indians. They are known for taking orders, putting up with hardships and not fighting.

Most ordinary sailors will also earn more than IT pros working in India (and me). Usualy they buy flats in Bombay, Mangalore, Cochin, Chennai, Vishakapatnam etc.

Unlike other countries, their wives wait for them (any other country their wife will divorce them or they cannot get married at all). Hence becoming a sailor is a viable career option in India