Thought for the day
"If it looks like a duck, and quacks
like a duck, we have at least to consider the possibility that we have a small
aquatic bird of the family anatidae on our hands."
-
Douglas Adam (English, 1952-2001)
Word for the day
Schlemiel
(n)
An awkward and
unlucky person for whom things never turn out right.
(Source: Dictionary.com)
Malice towards none
PM Modi began his term with a visit to Bhutan. He will
complete first year with a visit to China.
In the mean time he has travelled across seven seas and
five continents.
Time to serve the food
As per current estimates, the urban population of India is set
to rise by more than 400 million people to 814 million by 2050. The country is
likely to witness mass urbanization only seen before in China. Most Indian
cities today face extreme infrastructure constraints.
In past seven decades we have perhaps developed 25 odd new
cities. Besides Chandigarh, almost all new cities like Gurgaon, Gandhi Nagar,
Navi Mumbai, Dispur, Secundrabad, New Raipur etc. have evolved as satellite
town of a large congested city without much long term planning. Many of these
cities are suffering from inadequate civic amenities like water, electricity,
parking space, security, etc. Lack of employment opportunities makes people
travel long distances and hence problems of pollution and poor quality of life.
Under these circumstances, there are three options to improve
life of the people. (a) Provide modern amenities and employment in the 6,50,000
villages of the countries and thus reverse the flow of immigration from
villages to cities; (b) create new urban infrastructure and let the manage mass
migration of people from villages to these cities; and (c) use a judicious mix
of first two options, i.e., improve quality of life in some villages and build
new urban infrastructure.
The government of India seems to have opted for the third
alternatives. It plans to build 100 smart cities to decongest exiting cities
and provide necessary social and physical infrastructure in villages through
schemes like PURA (Providing Urban amenities to Rural Areas).
Building smart cities is a good idea. Making 100 of them is even
great idea. But we need to understand and accept that smart cities are not
merely about technology and infrastructure. It is indeed more about smart
people who are dedicated to quality in life and are fully compliant.
I have so far not seen much effort on the part of government or
civil society to promote such dedication and enforce compliance. The
cleanliness initiative of PM Narendra Modi has the potential to drive an
effective mass civic compliance movement, but so far the commitment to this
program has been sketchy.
It's already 11PM, serve the food
PM Narendra Modi and his government have invited the entire
world to come to India and experience the red carpet welcome. A grand banquet
has been organized. Many guests have arrived well in time. The evening started
with pleasantries and then began the session of speeches. Many leaders have
spoken eloquently. Their views, vision and promises have been received well.
But it is 11PM now. The guests are hungry. They need food. But
there is no sign of even appetizers.
...set your house in order
It is widely known that many strategists and fund managers are
seriously looking for long term investment themes in programs like Make in
India, Development of Smart Cities, Clean India, Digital India, Inland
Waterways etc.
To assess the validity of these themes and identify some micro
level investment ideas, I decided to gather some information.
After trying with many ministries and departments, I discovered
that though the government is already 11month old, its bureaucratic structure
is far from established. The churn is still continuing. The roles and
accountabilities are not yet finally assigned. In short, the execution team has
not yet taken position on the starting blocks.
The pursuit of information took me to the BJP headquarters in
New Delhi. Unfortunately, I could not get any bit of the desired information or
even any clue as to this information could be obtained.
But what I observed there, made me little skeptical about the
dedication and commitment of BJP workers and leaders to the cleanliness and
civic compliance. The toilet meant for the use of visitor was dirty and
stinking like a typical municipality managed public toilet. Pan Masala sachets,
empty cigarette boxes and plastic cups were strewn around garbage bins. The
canteen was dirty and filled by house flies. There was a lot of temporary
looking permanent structures, which I suppose is to dodge the stringent Lutyens
Zone building rules. Most structures were highly energy inefficient and lack
proper ventilation.
The Union Minister for Urban Development, who should logically
be responsible for delivering smart cities, also happens to be the Minister for
Parliamentary affairs. Given the persistent logjam in Rajya Sabha, he naturally
spends more time in managing the relations with opposition parties and the
unhappy media personnel, as compared to issues like urban development.
For now I have given up on the this theme. Perhaps I will
revisit a year later.
In the context it is pertinent to note the following excerpts
from the interview of Ramakant Jha, CEO of GIFT city, Ahmedabad published by Reuters India and an interview
of Rajeev Malik, a senior economists at CLSA, Singapore.
India: A Truck With A Broken Gear Box
"The delay in passing the land acquisition legislation is
disappointing, as is the compromised design of the GST—a well-designed GST has
the potential of doing for India something similar to what the entry into the
WTO (World Trade Organization) did for China. Despite repeated assurances by
the government, there are still doubts about the consistency and clarity on
India’s tax policies. Worries over retrospective taxation haven’t gone away
fully, and the latest issue of tax demands for prior years on international
funds investing in India leaves a lot to be desired. The approach towards a
critical area like education remains an enigma wrapped around a question mark."
"The Modi government has some meaningful achievements but
still appears to be under-performing a key test—the pick-up in economic growth.
Further, there is a feeling among investors that the government could have
moved faster. The fact of the matter is that either the government
overestimated its ability to jump-start growth or underestimated the time
needed to fix the multiple factors which had crippled growth. In any case, it
is difficult not to be constructive on a secular story like India. However, it
is important to reiterate that the much-awaited acceleration in economic growth
will be slow and uneven initially. The government is partly a victim of high
expectations, unrealistic in some cases. It also comes across as being somewhat
defensive for its pro-business approach and is caught in this unnecessary
political web of being branded anti-poor. Spreading the fruits of faster growth
is the best economic medicine for dealing with poverty. The government should
emphasize the benefits of reforms more assertively rather than being defensive
about them.
"The Indian economy is a like truck with a messed-up
gearbox. More petrol or fresh paint or new tyres or a new driver-cum-mechanic
won’t be successful in making it to move faster until the gearbox is fully fixed.
Fixing the gearbox will take time. Investment recovery continues to be held
back by structural factors, institutional issues, supply-side constraints and
policy uncertainty. The banking system is burdened with asset quality issues,
while corporate debt overhang constrains a quick turnaround in taking on risk.
Corporate balance sheet stress is particularly high in infrastructure and
natural resources. Higher private capex will need improved profitability; this
again will be slow in playing out. The domestic headwinds are complemented with
subdued global demand. The above is not to say that a new investment cycle
won’t take shape. To be sure, some of the pieces are already falling into
place. But the turnaround will be gradual and uneven. Investors shouldn’t let
impatience cloud their judgement."
"The Reserve Bank offered an inconsistent contributing
factor of poor monetary transmission of its earlier interest rate cuts for not
cutting the repo rate earlier this month. I say inconsistent because poor
monetary transmission is hardly a new problem in India. RBI did not raise it as
an issue when it was raising interest rates in late 2013.
Governor (Raghuram) Rajan had raised rates by a total of 75 bps
(basis points) after coming to RBI but there was hardly any transmission of
those into banks’ lending rates.
Does anyone recall the Reserve Bank signalling that it will wait
for banks to pass on, say, the first two rate increases before taking a call on
further tightening?"
"One critical challenge is that most high-frequency data
don’t echo the more favourable signals in the annual GDP data, which also seem
to be out of sync with the bottom-up evidence and feedback from corporates. The
forecasting challenge is compounded by limited history of the revised data—growth
rates for only three years are available. There is some improvement in clearing
the backlog of stuck investment projects but the delay in passing the land
acquisition legislation is disappointing."
"Government officials badmouth negative actions of rating
agencies but become their cheerleaders when an action is favourable. A more
balanced approach might help to improve their credibility. Different asset
classes— equities, fixed income and currencies— had already priced in improving
macro dynamics. Moody’s move—although not without caveats—essentially
formalizes that improvement."
100 ‘smart cities’? Getting just one done will be a challenge
Prime Minister Narendra Modi’s plan to build 100 “smart cities”
by 2022 to decongest existing urban centres probably will take longer to
achieve. Reuters visited the foundations of one of these cities in Gujarat, a
finance centre called Gujarat International Finance Tec-City (GIFT).
Situated between the cities of Gandhinagar and Ahmedabad, the
government wants the city to double as an international finance centre to rival
crowded Mumbai and business hubs such as Singapore and Dubai. It plans to offer
drinking water from the tap, automated waste collection and dedicated power
supply. [Full Story]
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