It's not the one you are looking for

Thought for the day

"Emancipation from the bondage of the soil is no freedom for the tree."

-          Rabindranath Tagore (Indian, 1861-1941)

Word for the day

Anthesis (v)

The period or act of expansion in flowers, especially the maturing of the stamens.

(Source: Dictionary.com)

Teaser for the day

Is the "Breaking News" syndrome ripping apart the basic fabric of the society by sensationalizing trivia, or it truly seeks to invoke and give some purpose to the indifferent populace?

It's not the one you are looking for

Caught in traffic jam caused by Congress party workers over the Land Bill issue, I decided to give up and join the small but spirited group. It was nice to be treated with some tea and snacks after a round of sloganeering. The slogans were mostly uninspiring and targeted to please the party President rather than farmers. The usual Sonia ji sangharsh karo hum tumhare saath hain (Sonia ji we are with you in your struggle) appeared rather trite.

An impromptu discussion with some workers from Haryana and Punjab during the tea break was quite revealing. None of the 10 young demonstrators, all from farmer families, had any clue what they were protesting about! Three of them had political ambitions and the rest just tagged along.

After spending well over two hours, I could make out that Congress is dissipating its scarce energy on something that may not yield any electoral dividend for it. To the contrary, by making the land acquisition issue a platform for comeback the party may actually be helping the regional opponents like JDU, SP, TMC, TRS, TDP, Shiv Sena, NC and BJD.

The agitation over land acquisition may have temporarily created some poor sentiments against the NDA government in rural areas, but the Congress Party is in no position to capitalize on it.

The data prima facie suggests that the segment potentially aggrieved by the land law is relatively much smaller to cause material electoral reverses at national level in 2019 general elections. In my sense, for making a comeback, the Congress Party needs a substantial issue that could touch at least 50% of the households and then vigorously pursue it for the next four years.

A stroll back in history would tell the Congress Party that regime changes in India have occurred when the ruling party/group got disconnected with the bottom of the pyramid in pursuit of faster economic growth (or personal ambitions) and opposition could rake in an emotional issue to fill the chasm. It was Mrs. Indira Gandhi (and emergency) Rajiv Gandhi (and Bofors), Narsimha Rao (and JMM bribery case) Atal Bihari Vajpayee (and Aam Aadmi) and Manmohan Singh (and 2G and Coalgate).

2009 victory of Congress party despite all economic mess, occurred due to MNREGA that kept it connected with the poorest amongst poor. The issues like FDI in retail, multiple scams which were seen as pro rich allowed BJP to make an entry on traditional turf and afforded the Congress Party its worst ever defeat in 2014.

The way BJP is going, I believe material improvement in macroeconomic conditions & governance standards, and direct connectivity of leadership with masses, will leave an extremely thin crack for the Congress Party to sneak in. The Congress Party would therefore need an explosive issue to widen the crack; which the land acquisition is certainly not the one.

I will delve a little more on the land acquisition issue in next couple of days, before I leave for a 10day trip to central India to assess the feelings of villagers and tribal people about new land acquisition and mining laws.

Mining for opportunities

Thought for the day

"Gray hairs are signs of wisdom if you hold your tongue, speak and they are but hairs, as in the young."

-          Rabindranath Tagore (Indian, 1861-1941)

Word for the day

Gibber (v)

To speak inarticulately or meaninglessly or foolishly.

(Source: Dictionary.com)

Teaser for the day

Masochism of all governments in India is intriguing. They don't like to do anything unless put on mat by media and thrashed!

Mining for opportunities

Considering the corporate earnings outlook, plateau in the domestic macroeconomic good news, mostly assimilated political & policy environment, and fragile global financial conditions, it is reasonable to believe that we are some distance away from a new secular bull market. Though, it is always a good idea to prepare the ground and sow the seed well in advance; doing it too early may result in total dissipation of effort and resources.

I have opined in many earlier posts also, that the bull market in Indian equities will commence mostly due to cyclical recovery in domestic economy. The global factors, primarily liquidity and soft commodity prices may provide some extra impetus. Readjustment in global capital and currency markets due to reversal of rate cycle in US when most other major economies are continuing to be accommodative, shall continue to cause spells of heightened volatility and uncertainty.

Therefore, the investor positioning in Indian equities has to be based on primarily domestic growth drivers, adequately accounting for higher volatility.

In my view, decent investment opportunities may exist in the following broad areas from a 5+ year investment horizon.

Railways could be to 2015-2020 what roads were to 2003-2007. I would however focus on technology leaders rather than generic stock (wagons and wheels) suppliers. In my view, under the new governance paradigm and rising wage rates, it would be difficult for the contractors to make even normalize profits. Companies with proprietary technologies in process automation and productivity enhancement should be preferred.

Agri productivity as an economic activity will likely enjoy highest priority for the incumbent administration. Focus should again be on technology innovators and market leaders rather than generic fertilizer producers.

Cyclicals. Buy cyclicals and industrials with god balance sheet and decent operating leverage (cement, capital goods, auto and EPC).

Global businesses (IT, pharma, auto & ancillaries) as INR completes its correction over next 12-24months.

Consumers (FMCG, 2wheelers, pharma, textile, finance, media) for demand pick up on rise in employment and general household income level.

To put in simpler words, the investment opportunities may be explored in the following areas:

(a)   Industrial companies with market and technology leadership, strong brand equity and access to global markets. Product companies rather than services companies are more preferable as they gain from inventory correction, pricing power among other things. I prefer the companies with substantial operating leverage and lower financial leverage.

(b)   Consumer companies both in staple and discretionary space which may benefit from rising consumption demand, stable global economy, weaker INR, lower commodity prices.

       Correction in stock prices in this space due to poor rural demand in next couple of quarters may be a good opportunity to accumulate.

       I would prefer a good mix of staples and discretionary products with special reference to the youth. Though, tobacco is something which I would continue to avoid.

(c)   Local units of global corporations that may see larger participation through more investment, hike in stake or transfer of manufacturing operations for regional exports. Heavy engineering companies with proven track record and leadership in railways and defence technology would be my preferred picks.

       A 10% weakness in INRUSD from current level may prompt some buy backs, especially in companies with material cash hoard.

(d)   Financials will inevitably participate in any bull market. Reduced financial stress, better yielding bond portfolio, higher credit demand, geographical spread due to deeper financial inclusion efforts, and recapitalization are some ideas that will drive value of financial stocks higher from FY17 onwards.

       However, as a matter of strategy I continue to remain circumspect about the PSBs. I would therefore suggest private sector lender including select NBFCs

(e)   One of the primary premises of my bull case is softer commodity prices. I would therefore not suggest any global commodity exposure. Domestically however cement could see a major spike up due to better utilization rate. Financially unleveraged large players with good operating leverage could be looked upon.

(f)    Some companies from textile, construction material, auto ancillary, and consumer durable have done amazingly well to acquire technology, market and product leadership in global sphere. These companies enjoy premium valuations, deservedly though.

       A correction in prices from current levels, would be a good opportunity to buy these companies.

(g)   The exporters especially IT and pharma should continue to do well. A correction due to cyclical strength in INR would provide a good entry point.

Opportunity vs. threat

Thought for the day

"The butterfly counts not months but moments, and has time enough."

-          Rabindranath Tagore (Indian, 1861-1941)

Word for the day

 Collywobbles(n)

A feeling of fear, apprehension, or nervousness.

(Source: Dictionary.com)

Teaser for the day

Why do e-commerce firms need to advertise so much on conventional media like TV and newspaper?

Opportunity vs. threat

People scouting for opportunities to buy or sell stocks in secondary market based on political changes or policy related developments need to exercise extreme caution, in my view.

The policy changes emanating from the changes in political regime, legal interpretations or social developments do create once in lifetime opportunity and threat for the entrepreneurs who are invested or who wish to invest in a particular business opportunity.

The changes usually also create opportunities for the workers who could preempt the likely technological, financial and managerial changes  well in advance and develop the necessary skills to avail early mover advantage in the new paradigm.

These changes sometime also create opportunities for speculators who could rightly preempt the opportunity in the resource shift and place the bets well in advance.

For traders who buy and sell stocks in secondary market for a brief period, the opportunities arising out of political or legal changes are mostly a function of luck. Anecdotally, I have found the luck mostly not favoring the people seeking to make a quick buck from something that has already grabbed the headlines in pink papers.

This leaves us to my community, i.e., people who are interested in investing in good businesses, but for the paucity of time, skills and/or resources we are contend with owing some share of these businesses rather than controlling the ownership and management of these businesses.

Our commitment to these businesses is usually limited the good times and rational market.

We do not usually stick to these businesses if they show any sign of losing leadership in the spheres of market share, product quality and acceptance, financial management efficiency, technology, innovation, etc.

We should not usually stick to these businesses when the market participants show irrational exuberance towards the future prospects of such businesses and start affording valuations that one would not normally associate with such a business.

The question is whether the policy changes that are taking place currently, due to changes in political alignments, legal interpretations and social pressures present any investment opportunity for investors.

Before answering the question it is critical to understand the changes that are taking place in the environment. We need to identify the changes and assess whether these changes are sustainable to result in a business and/or investment opportunity.

In my assessment, the changes that are currently taking place present more threats than opportunities.....to continue

Sir, we did this!

Thought for the day

"It's a funny thing about life; if you refuse to accept anything but the best, you very often get it."

-          Somerset Maugham (British, 1874-1965)

Word for the day

Beamish (adj)

Bright, cheerful, and optimistic.

(Source: Dictionary.com)

Teaser for the day

Does the practice of writing recommendation for school and hospital admissions, railway tickets, etc. by MPs and MLAs violate the constitutional oath of 'Without fear or favor" and Without affection or ill will"?

Sir, we did this!

Yesterday was the annual result day for both my daughters. It was insightful to speak with some parents whose ward study in senior classes. It was even more interesting in light of what the Principal claimed in a rather boastful and boring speech.

Many parents lamented that school teachers do not put in enough effort. The children have to necessarily take multiple tuitions, leaving them with no time to pursue any hobby or sport. Even parents have to spend extraordinary time helping their wards in studies. Most senior students in fact are encouraged to miss school and study at home.

However, the credit for a good result is claimed almost entirely by the principal of the school. I found it rather unethical. Though the aggrieved parents appear to be complaining just as a ritual, absolutely not interested in putting any effort to change the things. The child scoring good marks is good enough an outcome.

On my way back home, I saw some hoardings showing how thankful and obliged some local politicians were to their elected representatives for repairing of roads, cleaning of drains, and getting the hawkers permits to squat on pavements.

Back home I heard a minister claiming in the parliament how in just 10months the government has done wonders to put the country back on high growth path, brought inflation down, eliminated the current account deficit and made doing business so easy. In full page advertisements in newspapers, the government of Uttar Pradesh made similar claims of doing wonders in a short span of three years.

An unusually large number of research reports on my table and hard disk appreciate the government in general and the prime minister in particular for achieving wonderful results. No one cares to talk about the people who have to toil real hard just for survival.

The parents are making sacrifice and the students are investing the best part of their life. Two square meals and some meaningless economic data is what they get to console themselves. The principal gets all the credit.

Duh..............!

If you feel I am being unnecessarily and excessively cynical. You might be mistaken.

The point I am trying to make here is that as an investor, our focus should be on the quality of businessmen & workforce and the business opportunity in the offing. We might miss many good opportunities or mistake a trap for opportunity if we focus the politics instead.

For example, the conduct of the government so far has not suggested that it would begin to bother about the interest of minority shareholders anytime soon. Those seeking an investment opportunity in that space may very well get trapped, yet again.

We shall talk about the opportunity next week.

The return of political skepticism

Thought for the day

"We are not the same persons this year as last; nor are those we love. It is a happy chance if we, changing, continue to love a changed person."

-          Somerset Maugham (British, 1874-1965)

Word for the day

Portent (n)

An indication or omen of something about to happen, especially something momentous.

(Source: Dictionary.com)

Teaser for the day

Does smooth passage to Insurance Bill in Rajya Sabha indicate that INC and TMC might be to NDA what SP and BSP were to UPA.

The return of political skepticism

The political milieu of the country has taken a turn for the worse over last few weeks. The investors, both domestic and global, have been watching the political developments keenly and might be little concerned about the recent developments. Especially considering that the positive sentiment on India has largely been driven the promise of a stable, transparent and responsive government post May 2014 general elections.

The ruling BJP has faced many embarrassing moments in and out of Parliament during past one month. For one, the conduct of allies like Shiv Sena, TDP and PDP has been at odd purpose with BJP. Secondly, the united opposition that enjoys majority in Rajya Sabha has been leaving no opportunity to embarrass the government. Thirdly, the extreme right wing elements within and outside BJP have been challenging the credibility of the PM's promise of inclusivity and faster development.

The principal opposition Congress Party has been struggling to overcome the spate of electoral defeats it has faced in the past couple of years. The party has seen total breakdown in the lower level organizational structure due to a variety of reason. To make the matter worse, the dithering top level leadership has also been conspicuous by their absence from addressing the Party's concerns.

Most regional parties, like JDU in Bihar, TMC in West Bengal, SAD in Punjab, and AAP in Delhi have been mired in controversies. Impropriety, personal ambitions and larger aspirations have impacted the image as well as performance of the governments.

Smooth passage of the Insurance Amendment Bill in Rajya Sabha, might have provided some consolation to the investors that all sanity is not lost. But the mood in opposition circle over the critical Land Acquisition Bill and Mining Bill does not appear kind.

The legal trouble for the former prime minister Dr. Manmohan Singh, and controversy surrounding Delhi police's curious incursion in the Congress Vice president Rahul Gandhi's office shall make the matter worse.

The tax dispute over retroactive tax demand from Cairn Energy Plc. is not helping the government stance of "no tax terrorism" and "no retro tax". A bad publicity on this account, much like the infamous Vodafone case, could impact the credibility of the government.

The forthcoming Bihar state assembly elections due later this year are indicated to be one of the most acrimonious elections seen in recent times. A united opposition and BJP infested with internal strife could further queer the pitch for the central government.

Outside financial markets, the recent squabble between rival factions within AAP, has certainly put a little dent on the optimism of urban middle classes over improvement in socio-political conditions. Restoration of skepticism prevalent till summer of 2013 may have serious economic repercussions in my view. It is therefore important for investors to understand the implications of AAP.................to continue

Reporting from the hinterland

Thought for the day

"Great minds have purposes; others have wishes."

-          Washington Irving (American, 1783-1859)

Word for the day

Brouhaha (n)

Excited public interest, discussion, or the like, as the clamor attending some sensational event; hullabaloo:

(Source: Dictionary.com)

Teaser for the day

A youthful Congress driven by the Idea of AAP would provide a strong and stable opposite pole in the Indian politics.

Reporting from the hinterland

A short two day trip to rural areas of western UP and discussions with a few farmers, agro commodity traders and food processors provided some interesting insights into the current economic, social and political conditions.

Though the visit was confined to the villages closer to industrial towns, in my view, the prevailing conditions could be reasonably extrapolated to the entire State of UP, and the adjoining states of Uttrakhand, MP. Haryana, Bihar and Rajasthan.

The unseasonal rains have caused serious damage to the standing crops of wheat, mustard, and pulses. The damage to Sugarcane is not very serious from rains, but the threat from fungus and pests has increased manifold. There is minor damage to Potato crop.

Given the late monsoon rains, most farmers were expecting a good winter rabi crop this year and accordingly have invested higher than normal in the crop. The losses, coming on the back of a poor summer Kharif crop, have compounded impacting the purchasing and borrowing power of the farmers. The majority of landless and marginal farmers may be in distress given lesser demand for labor from construction sector and lower MNREGA spending.

The interesting thing is that most farmers are now aware of the technology advances. They keenly follow the price movements across global and local markets. Most farmers follow midterm weather forecasts and El Nino developments. The forecast about likely below par monsoon this year has dampened the spirits furthers. Most rural households appear to have fastened the strings of their purses tightly.

Another interesting insight was provided by a senior district administrator. He highlighted that in most of rural and semi-rural areas of UP the popular inclusion scheme PM Jandhan Yojna (PMJY) has been marketed and sold as some sort of blessed goose that will regularly keep laying golden eggs. It has not been marketed as a tool to promote inclusion or enhance household savings. The outcome in the short to midterm will therefore only be limited to plugging the leakages in grants that are transferred directly.

On political side, the popularity of PM Modi may be on the wane in UP. Akhilesh government is a clear beneficiary of this. The state government has seriously enhanced its engagement with people post May 2014 Lok Sabha election rout. Save for a dramatic improvement in the economy and performance of the national government, 2017 state assembly election may not be a easy going for BJP.

The social strife seen during the run up to the Lok Sbha election has conspicuously diminished. Muzzafarnagar, Saharanpur and Shamli were found calm and quiet; not many people complaining about the state's apathy.

Head, tail or the edge - III

Thought for the day

"Young lawyers attend the courts, not because they have business there, but because they have no business."

-          Washington Irving (American, 1783-1859)

Word for the day

Ballast (n)

Anything that gives mental, moral, economic or political stability or steadiness: 

(Source: Dictionary.com)

Teaser for the day

Would be more pertinent question to ask "Will Mufti Government unhesitatingly arrest Masarat Alam et. al. again if they are found to be indulging in unlawful activities?"

Head, tail or the edge - III

I have been cautioning my readers that global financial markets might be heading for a "perfect storm" this summer. I am expecting a deeper correction in Indian equities also. This to me will be an opportunity to stock up, even by leveraging a little.

I do not expect the markets to panic like it did post Lehman collapse in 2008-09. I find the participants much better informed, prepared, and hedged. In specific Indian context, the derivative open interest is now predominantly in index options and stock options, as against stock futures in 2008.

Moreover, the political situation now is much better and macro indicators are close to bottom against close to peak in 2008.

Twister

As discussed in past couple of days, there are strong headwinds and tailwinds present in the Indian economic system that should prevent any larger or faster move in Indian equity prices in next 6-9 months.

However, there are some strong pressure areas building up near term (next 3 months) that may cause much greater volatility and deeper correction in the equity prices.

In particular the following factors need to watched carefully:

(a)   Intensity of the discussions around US Fed  rate hike.

(b)   Poor results for 4QFY15 and consequent earnings downgrades.

(c)   Rise in consumer inflation due to unseasonal rains and El Nino fears.

(d)   Political hostilities rising as the Parliament meets after the recess to complete the budget session agenda.

Short term outlook (upto 12 months)

Market may witness higher volatility and larger moves in next 6-12 months. While not much further negative than already anticipated is expected to occur on domestic front, global uncertainties may rise with deceleration in Europe, Japan, China and major commodity producing emerging markets. Nifty should move between a larger range of 7420 - 9400. Strong buying and leveraging opportunities will emerge in to 7850-8000 Nifty range.

Mid-term outlook (12-24 months)

Expect Nifty to make a strong positive move over next two year with upper bound at 10800. The risk reward at present from this perspective is positive. Much sharper move could be expected in broader markets.

Strategy

(a)   Stay out of the way of expected twister in next couple of months.

(b)   Take shelter in strong defensive equity and short term accrual debt.

(c)   Keep emergency kit ready (adequate cash and Nifty puts) to gain from a sudden fall.

Head, tail or the edge - II

Thought for the day

"I am always at a loss at how much to believe of my own stories."

-          Washington Irving (American, 1783-1859)

Word for the day

Eyesome (adj)

Oleasant to look at.

(Source: Dictionary.com)

Teaser for the day

Mukesh Singh! What about politicians, academicians, Khap leaders, religious leaders and all those men who commit marital rape and doemstic violence everyday

Head, tail or the edge - II

As discussed yesterday, there are headwinds present in the system that may slow down the up move of Indian equities in the months to come. Arguably, the headwinds are mostly macro in the nature and not insurmountable.

Tailwinds

Fortunately for Indian equities, the tailwinds present in the system are strong, visible, and operating on both macro as well as micro levels. These may potentially catapult the equity prices in short to midterm (6-36months).

The improvement in macro indicators like core inflation, current account deficit, fiscal deficit is generating strong tailwind.

Someone may argue that this improvement in macro indicators may not be sustainable. I would argue "yes" and "no".  For example:

(a)   The current account improvement is largely attributable to global deflation in commodity prices, especially energy prices, and lower project related engineering imports due to lower investment demand in past five years. Improvement in domestic and global economy may reverse these gains rather fast.

       In my view, it is true that at present the gains on current account are temporary in nature. However, given the strong emphasis on renewal energy, implementation of gold monetization scheme, and a stronger money laundering law, these gains may likely sustain over a longer period.

(b)   The present fiscal correction is also attributable to lower fuel subsidy bill, higher non-recurring receipts from sale of natural resources, mainly coal & telecom spectrum, disinvestment in PSU and SUUTI and lower social sector spending etc. There is little sign of tax buoyancy to suggest sustainability of better fiscal conditions over mid to long term.

       In my view, it is true that currently fiscal correction is mostly an outcome of expenditure rationalization. A change in political conditions or a global economic shock may lead to a fast reversal.

       Nevertheless, the measures like GST (to increase tax compliance), direct cash transfer (to plug leakages), decentralization of social schemes (for targeted implementation), fuel price de-regulation, and active engagement corporate sector in building social sector infrastructure (via mandatory CSR and tax incentives) would certainly yield positive results over mid to long term.

(c)   At micro level, the strongest tailwind is coming from the improvement in execution. The framework for faster execution of infrastructure projects involving railways, energy, roads and defense is almost in place. The results could be visible in next 9-18 months, depending upon how fast the government could get the issues relating to acquisition of land sorted out. Improvement in financial sector (growth, inclusion, and social security) shall also yield positive results....to continue

Head, tail or the edge

Thought for the day

"The idol of today pushes the hero of yesterday out of our recollection; and will, in turn, be supplanted by his successor of tomorrow."

-          Washington Irving (American, 1783-1859)

Word for the day

Sternuation (n)

The act of sneezing.

(Source: Dictionary.com)

Teaser for the day

How many in India would have watched the controversial BBC documentary if the issues was not raked by media at all?

Head, tail or the edge

"Could Congress get 300 seats in 2019 Lok Sabha elections?" I asked the people who called me to wish a Happy Holi. All of them had a belly laugh believing it to be some sort of Holi joke.

By the evening I was convinced that if at all it occurs, it would be perfect example of a Black Swan event in Indian politics. At this point in time people are not even willing to give it odds they would usually give to a tossed coin falling on its edge!

Getting over the Holi mood, I tried to fathom a Black Swan event for the Indian financial markets, which might violate the ban on Bull slaughter recently imposed by the Maharashtra government.

I could appreciate the strong Headwinds and Tailwinds, most analysts and market commentators are talking about. Stretching my imagination a bit far, I could fathom these headwinds and tailwinds culminating together form a twister. But the coin falling on its edge! I guess it still remains unfathomable; and naturally so. If fathomable, these swans would not be black.

The investment strategy therefore needs to focus on the strong headwinds and tailwinds. The discussion about the probability of the coin falling on its edge may wait for next Holi.

Headwinds

The strongest headwind for the Indian economy and therefore Indian financial markets is coming from the rural economy. My survey across nine states indicates that the unusual rains in February and March have caused extensive damage to standing Rabi crops. This coming on the back of a poor Kharif crop in many states, is likely to have serious impact on the rural income, consumption and debt servicing ability. The damage is extensive in case of fruits, vegetable, oilseeds, wheat and pulses. This should reflect on March and April consumer price inflation also.

I my assessment, demand for farm inputs and farm equipments may be adversely impacted. The delinquencies in farm credit may rise. The demand for durables - auto, housing, electronics - from rural areas will definitely be impacted.

The election for Bihar legislative assembly due in October this year presents another major headwind (headache) for the government. Many parties, especially the non-Congress opposition parties, are taking this election as a fight for survival. In my assessment their aggressive stance shall obliterate any chance of cooperation with the arch rival BJP. In fact the hostilities may likely rise materially in run-up to the election, impacting the execution of the development agenda.

The reversal of USD carry trade ahead of the policy rate hike by US Federal Reserve later this year could also adversely impact the flows in emerging markets, including India....to continue

Different things, or just done differently

Thought for the day

"Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves."

-          Albert Einstein (German 1879-1955)

Word for the day

Augur (v)

To conjecture from signs or omens; predict.

(Source: Dictionary.com)

Teaser for the day

Regular vipasana, meditation, yoga, only home cooked vegetarian food, blood sugar level 300mg/dl.

Find the odd man out?

Different things, or just done differently

Continuing from yesterday, to analyze if the incumbent NDA government is following materially different socio-economic policies from those followed by the previous UPA government, we need to distinguish between the policy framework and administrative framework for implementation of policies. We need to find whether the government is doing different things, or doing the same things differently, or doing the same things in the same manner.

Let's analyze the issue by examining some popular performance claims of the incumbent NDA government.

(1)   Coal block auctions - The process started after CAG reported irregularities in the allocation of 2G spectrum and coal blocks. Supreme court cancelled the spectrum allocation and licenses of 22 telecom operators and 208 coal blocks allocated in past two decades in arbitrary manner. UPA government started the process of selling spectrum through competitive bidding in a transparent auction. It was inevitable that in future coal and other important national resources could only be sold at market price through a transparent process. The current government has not made any material policy deviation here.

(2)   Federalism - The process of devolution of greater financial powers on the federal states started with rise of regional parties and decline of Congress party during late 1980s. Successive union governments have been devolving powers on the states. Transferring some social schemes to states and accordingly increasing their share in allocation of tax revenue is not a different policy measure. Neither is opening IIT, IIM and AIIMS in each state of the union. UPA appointed the 14th Finance Commission and NDA accepted its recommendations. No big deal.

(3)   Globalization of the policy formulation and presentation - The process was perhaps started by Rajiv Gandhi who appointed Sam Pitroda to head telecom revolution in the country. Dr. Manmohan Singh, Montek Singh Ahluwalia and Raghuram Rajan were three other notable imports from IMF by various Congress led governments. The jargon had started changing from summer of 2013 when Rajan took charge at RBI. It is now distinctly global. A nuanced policy change here is that now right leaning market economists dominate the consultative teams as against the left leaning development economists.

(4)   Lower inflation - In my view, there is nothing structural or policy driven in the current low rate of inflation. Lower global commodity prices; the demand suppression due to poor rural income growth; lower job & income growth, financial suppression due to negative real consumer rates and a high base effect have led the statistical inflation down. No major improvement has yet been seen on the supply side. The inflation targetting started with Rajan assuming charge at RBI. The policy has now been reduced in writing. Again a nuanced change.

(5)   Financial inclusion - The process started a decade back. No doubt the execution took a big leap in past six months. Again no policy issue here..............to continue