Most cities in India are faced with the challenges of rapid urbanisation. As a result, town planning has become very important. Indeed, there has been a sharp rise in the influx of people in India's leading metros. But poor planning has led to shortage of space and increased congestion. And it is not that the concept of town planning is something new. This was practiced even by the ancient civilizations of Mohenjo Daro and Harappa. Thus, there is an attempt now being made by India's prominent business leaders and academicians to lay the intellectual and financial foundations of the Indian Institute of Human Settlements. Nandan Nilekani and Uday Kotak are some of the names that have already doled out donations to this institute. Of course, there are already many ills afflicting the cities. And the establishment of such an institute may not be able to completely resolve these issues. Also, it could be a while before the institute really scales up as well. But one needs t o start somewhere and this could be the solution that India is looking for from a long term perspective.
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Monday, August 13, 2012
China's huge deficit in pension funding
Pension costs. This phrase is giving the Chinese government a headache. With an aging population, the costs became more of a burden for the government. As per a research carried out by Deutsche Bank which was published in the Bloomberg Businessweek, currently around 13% of the population of China is over 60. This is expected to increase to 34% by 2050. The rapidly aging population would lead to a huge deficit in the pension funding. As a result, the central government would be forced to fill up the balance. The government has stated that currently, it has sufficient funds to meet the pension related liability for a while. However, it is unknown as to how long would the funds last.
Another problem with the entire pension system is the huge inequality. In the rural areas, people are paid as low as 55 Yuan while in the urban areas, the amount is nearly 1,500 Yuan. This means that the people who are earning well continue to earn well even after retirement while those in the lower income group sink further. This has angered the younger working population who has expressed their dissatisfaction of funding the government retirees without having sufficient funds to fund their own retirements. The one possible solution for this is participation by the local provincial governments, but they don't like handing out cash for pensions. As a result, the Chinese government's credibility over sustaining the pension system has come under fire. It would interesting to watch and see how it performs in the future.
Another problem with the entire pension system is the huge inequality. In the rural areas, people are paid as low as 55 Yuan while in the urban areas, the amount is nearly 1,500 Yuan. This means that the people who are earning well continue to earn well even after retirement while those in the lower income group sink further. This has angered the younger working population who has expressed their dissatisfaction of funding the government retirees without having sufficient funds to fund their own retirements. The one possible solution for this is participation by the local provincial governments, but they don't like handing out cash for pensions. As a result, the Chinese government's credibility over sustaining the pension system has come under fire. It would interesting to watch and see how it performs in the future.
Bank bailouts have wiped out privatization proceeds!
Financial Times, the popular financial daily, has come up with a very interest statistic. First, it has taken proceeds of the last 30 years from Government backed privatisations across the world. And then it has compared those with the amount these very same Governments have put into rescuing crisis hit banks. Do you know what the outcome has come to? Well, it so happens that the privatisation proceeds of roughly US$ 1.8 trillion get nearly wiped out by the US$ 1.7 trillion that has been pumped into various banks in order to bail them out. In other words, Governments have nationalised assets just as they have privatised them.
You would wonder why there haven't been more privatisations despite the efficiencies that the private companies bring to the table. The answer could be had from the fact that whenever political and economic interests have clashed, it is mostly the former that has prevailed. Thus, Governments may have shown a tendency to indulge in more privatisation. But they have backed off at the very first signs of opposition. Besides, the volatility in capital markets hasn't helped either. And as things stand today, there isn't a very strong chance of privatisation edging out nationalisation over the next few years at least.
You would wonder why there haven't been more privatisations despite the efficiencies that the private companies bring to the table. The answer could be had from the fact that whenever political and economic interests have clashed, it is mostly the former that has prevailed. Thus, Governments may have shown a tendency to indulge in more privatisation. But they have backed off at the very first signs of opposition. Besides, the volatility in capital markets hasn't helped either. And as things stand today, there isn't a very strong chance of privatisation edging out nationalisation over the next few years at least.
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