Anna hazare / Kejriwal - Real Swaraj - Economics first politics later

It was 2011, when the whole of India was stuck to TV sets and the place called Ramlila Maidan. A new Mahabharat was fought. Finally Congress has to bite the dust in 2014 elections. Anyway, it was not Modi, who was winner, it was common people like Hazare, Prashant Bhusan, Yogender Yadav, Arvind Kejriwal, who were the real winner. They floated AAP and rest is history. Anyway, the key motivation was to get justice, equity in political powers. Part of it was achieved but what people forgot was Political power is of no use if they dont have parity and equity in Economic Power.

Unfortunately, in a country like India, Risk Rewards are not matched in economy. Take banking sector. I have been writing time and again that, NPA's are deep problems for the whole economy and not just one sector. Think from point of view of retail investor.

Retail investor ->Bank->Allocation to projects -> Return->Bank->Retail Investor gets share back

Now, this seems like very simple, but that is where simplicity ends. The risk rewards are unmatched here. Like any bottlenecks, this positive feedback loop has Projects as one of the bottleneck in the whole value chain. One likes it or not, the Projects in Emerging Markets are going to have inherent risks and hence require higher payoff say 15% (for the project to be viable). Now, the retail investor is getting only 10%. The 5% is risk premium. The promoter gets rewarded by by 5% differential (and then worked on his part of equity) for this risk.

But that is where the story become complex. The promoter only has rewards but no risks as normally what he does is use "Negative Equity"

"Project of 150 quoted as 100, and then 70% loan taken, finally pockets the 5 as negative equity"

When the balance sheets of banks are full of such loans, then does it make sense for retail investors to put their money with banks - No.

Though Marx said, Inequality in economic status (proletariat v/s Bourgeoisie) will lead to political revolution, I believe it be economic revolution instead of political revolution, as under

1. People will stop doing FD's in bank
2. People will stop investing in leveraged companies
3. People will stop following business news channels (hilarious it might seem but they also serve to the interests of institutional investors only and not retail investors as they always try to fool retail investors)
4. One of the extremes can be people can start their own lending clubs. I am not sure how but something similar to chit clubs or say bitcoin exchange enabled lending. Something which will use technology to remove banks as intermediaries

But these seems like Utopian luxuries as Parliament is full of Vijaya Mallaya and their cronies. Why will someone like Vijaya Mallaya be interested in curtailing role of banks.  

Leaders of Modern India - Please look into the issue and the solution for economy Swaraj