"New markets could be created
by rural potentials, which could lead to rise in the employment."
—A. P. J. Abdul Kalam (Indian,
1931-2015)
Word for the day
Sang-froid (n)
Coolness of mind; calmness;
composure
(Source: Dictionary.com)
Malice towards
none
Could IndiGo IPO do to the market what Reliance Power IPO did in 2008?
Had a chance to meet to a
secretary to the Government of Delhi. An average mind, was behaving like a big
feudal lord. Treated his subordinate staff like pampered slaves. Had different
assistants to hold his briefcase and drive his car. Had a traditional white
towel at the back of his chair. When moving out, two people rushed in advance
to call the lift and waited there for five minutes forcing the doors open with
hands till this "gentleman" arrived.
I know this is a common
description of the "Governments" in our country. The question is
whether this "feudal attitude" is responsible for policies which are
seemingly disconnected from majority of people, even though many law makers and
administrators come from this very section of the population.
Beleive what you see
In recent past many experts have
highlighted that the uncertainty and fear created by US Federal Reserve and its
officials through their official and public utterances is causing more harm to
the global markets than the eventual reversal of policy direction probably
would.
Through its latest statement
also, Fed has left the markets guessing. Giving people on both sides of the
line some reasons to be excited, Fed admitted that "the pace of job gains
slowed" but added that "the global economic jitters from the past
three months are now well in the rear view mirror".
Specifically, the complete
removal of the line that "recent global economic and financial
developments may restrain economic activity somewhat and are likely to put
further downward pressure on inflation in the near term" and the addition
that the fed is "monitoring global economic and financial
developments", excited the market most.
What the Fed statement did not
flagged adequately was the problem of secular stagnation in the industrial
world despite aggressively loose monetary policies.
The vicious cycle in which slow
growth in industrial countries is hurting emerging markets which have
traditionally exported capital to the developed world and thereby slowing
developed world's growth further. It has to be recognized and fully accepted
that post 2008 the capacity of industrialized economies to bear another global
shock has diminished materially.
The underestimation of the risks
of a global recession when the rates are close to zero and public debts are at
historic high levels, could leads to some nasty surprises. Remember, the
potency of monetary policy in global context is poorest at this point in time
with interest rates lowest and expected to remain that way almost permanently
in Japan and Europe.
The scope for fiscal stimuli is
also very limited in most of the industrialized and emerging world. With high
public debt, moderating tax revenues, slowing income growth and adverse
demography, the global economy is positioned precariously with virtually no
margin for error.
In Indian context, the recent
contest between FMCG majors and the research firm Nielsen is interesting. (see here) While the FMCG firms are confirming what I have
been saying for past many months, Nielsen saw green shoots - casting doubts
over veracity of data used by policymakers.
Nielsen data suggests the
industry is experiencing a strong revival. It estimates that FMCG sales grew
11.8% in the 9M2015 compared to the 6.8% growth the industry experienced during
the same months of 2014.
But CEOs of FMCG companies
dismiss these estimates as faulty. The market researcher is overestimating
growth and is not capturing price cuts accurately, they argue. "There are
signs of improvement and the market is not supporting demand revival,"
said Sunil Duggal, CEO of Dabur.
"We are well into the
festive season and two weeks away from Diwali, but there's no visible uptick in
consumption. The outlook continues to look challenging," he added.
"Our sense is that demand
revival is still a few quarters away," the chairman of another leading
foods maker said. "Nielsen is over reporting growth."
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