Thought for the day
” Let the one among you who is
without sin be the first to cast a stone. "
-
Jesus Christ
Word for the day
Cavil (int. verb)
To raise trivial objections; also, a trivial objection
(Source:
Dictionary.com)
Teaser for the day
If religion of Sanskrit is Hindu, what is the religion of
English, Urdu, Tamil, Bangla, Malyalam, Sindhi, Gujarati, Marathi, Punjabi,
French, German....?
Why bother about things you can't help
I am fortunate to have critics who are most charitable in their
criticism. For past two weeks especially they are leaving nothing to
imagination., Some of them have even picked up selective Punjabi expletives to
express their frustration with me.
Their main objection is to my nonchalance to seemingly exciting
events and data, e.g., Ukraine, Pakistan, Gaza, ECB stimulus, Fed tightening,
etc. My point is that anything which can be clearly seen by the last person
standing on the street (that is me) is not worth bothering about. So is not
which even the likes of Yellen and Draghi cannot see.
I like to factor in my strategy all that is known and/or
expected, whether quantifiable or not, and keep enough flexibility to
accommodate any black swan that may chose to visit unannounced. This saves me
from reacting to every news headline or getting excited over every hint of
trouble.
I understand it is unfair to use this column to take on my
critics, but who said life is fair!
Now coming back to normal business, I have been emphasizing that
the Indian economy may not sustainably return to the path of high growth (8%+),
in next 5years unless the virtuous cycle of "higher income - saving -
consumption - investment - income" gets kick started. So far we have not
seen any evidence of this happening.
The upward revision in growth estimates so far is coming from
expectation of faster execution and administrative efficiencies. New
investments are not on the horizon of analysts and economists so far.
The corporate profit growth in past couple of quarters is also
mostly driven by cost efficiencies and better export demand. There is no
evidence of pricing power returning to producers or material rise in consumer
demand.
In my (over) simplistic assessment the following pieces need to
fall in place before the virtuous growth cycle led by investment and credit is
kicked in.
(a) More money needs
to flow in the hands of consumers so that consumption demand and household
savings could grow at faster rate.
(b) Credit worthiness
of enterprise engaged in high gestation capital intensive infrastructure projects needs to improve.
(c) Lending
capability of financial institutions needs to improve materially both in
quantitative and qualitative terms.
(d) Enabling
industrial, fiscal and sustainability policy environment needs to be firmly put
in place.
(e) Monetary policy
needs to ensure that the foreign flows are not used to feed asset price bubble
like during 1991-1995 and 2003-2007 but are strictly channelized to built
productive assets and social & physical infrastructure.
In next few days, I shall discuss these points in some more detail. All
suggestions, comments and views (even with expletives) are welcome at vijaygaba.investrekk@gmail.com
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