Thought for the day
“Civilization began the first time an angry person cast a
word instead of a rock.”
-
Sigmund Freud (Austrian, 1856-1939)
Word for the day
Blatherskite (n)
A person given to voluble, empty talk.
(Source: Dictionary.com)
Teaser for the day
Yogendra Yadav and Ashutosh please stop saying “Bhai pehle
Uska sign le kar aao, phir main sign karoonga.”
Please accept that people have accepted that AAP is
different from traditional parties. So behave differently.
I don’t want whatever I want
Most participants in financial markets, including captains of
industry and trade have been clamoring for accelerated economic reforms ever since.
The present UPA regime has been severely criticized for “policy paralysis” and
lack of Will to implement key economic reforms.
Not surprisingly, Narendra Modi is being seen as the divine
intervention that will get India rid of the current social, political, and
economic crisis.
My interaction with many of these market participants, including
industrialist, traders, brokers, analysts, investors and bankers, in past one
year has underlined a serious dichotomy. The market is asking for something it
does not want – serious economic reforms.
An overwhelming majority of publically traded companies are
found to be direct or indirect beneficiary of (a) the inefficiencies of the
administration; (b) lack of transparency; (c) incongruent policy framework; (d)
unduly supportive politicians; (e) government largesse in form of misdirected
subsidies; and (f) protection from fair competition at the expense of
consumers, etc.
Some real economic reforms, as against administrative and
procedural corrections, could destroy the basic premise behind many large
Indian companies.
It needs to be understood that permitting FDI in retail trade
when Tata, Birla, Reliance and Goenkas are already there along with Biyani is
not a reform. It brings no fundamental change to the economy. It just creates
some more competition and brings the collateral benefits to consumers.
What reforms? The market participants are just excited about the
potential arbitrage opportunity this move could provide assuming foreigners
will buy the existing retailers paying some crazy value for their operations.
Somewhat similar is the case with FDI in insurance and pension.
Tell market participants that FDI will be permitted only in
green field ventures that will not be allowed to list for 10yrs and see how excitement
fizzles out.
The outrage seen after announcement of GAAR in 2012 union budget
and alleged irregularities in coal block and 2G spectrum allocation and
deafening silence over Radia tapes, in my view, is clear evidence that the
Indian corporates who are used to working under the patronage of political
establishment are definitely averse to economic reforms, contrary to what they
claim publically.
That is perhaps why no one is discussing that economic reforms
often mean transformational changes that not necessarily lead to immediate rise
in corporate profitability and aid in resource grabbing. On the other hand
these usually do lead to lesser protection, more competition and larger
accountability for corporates. If you do not want to pay taxes, cost of compliance
and market linked compensation for exploitation of natural resources clamoring
for economic reforms may not yield much.
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