"Religion and art
spring from the same root and are close kin. Economics and art are
strangers."
—Nathaniel Hawthorne (American,
1804-1864)
Word for the day
Schmooz (v)
To seduce with flattery
(Source: Dictionary.com)
Malice towards none
Ratan Tata is losing his heart to UP!
Does it mean Gujarat is also losing to UP?
First random thought this morning
The chill in Delhi's air is rising forcing people indoors early in
the evenings. The Winter session of the Parliament is ending today.
The government has two months, before the Budget session begins,
to set its house in order, sort out priorities, work out floor strategies,
reach out to opposition and showcase its achievements. Alternatively, it could
escalate confrontations and vitiate the environment further.
Either way, no winter vacations for the government!
Investment Strategy 2016-5: Investment, savings & consumption
Private investment & consumption, public spending and exports
are four primary drivers of economic growth of any nation.
·
Private consumption is in turn a function of
private income and borrowing.
·
Private investment is a direct function of
domestic consumption and export demand and is materially influenced by credit
conditions.
·
The government spending is a function of private
income & consumption (direct & indirect taxes) and government
borrowing.
·
Exports in simplistic terms a function of global
demand and relative terms of trade.
In simple terms, the price performance of various economic assets
primarily depend on economic growth and liquidity (demand-supply equilibrium),
I find it easy to portend as follows:
(a) Private consumption has
remained sluggish for past couple of years, led by decline in rural income.
Real urban consumption has also been under pressure due to persistently higher
consumer inflation. 2016 may see partial reversal in this trend, assuming CPI
remains under control, El Nino recedes and we have a normal monsoon after two
years, and pay commission and OROP disbursements find their way to markets.
Rising income may also see growth in consumer borrowings. Though
the household balance sheets have seen rising leverage in past one year, still
there is scope for further leveraging, in my view.
However, there is little to suggest that things will improve in
1H2016. So this kicker will come only in later part of the year.
(b) Given that presently
capacity utilization in Indian industry is low, balance sheets of corporates
are highly leveraged, export demand is decelerating and real rates are rising,
the environment for domestic private investment is expected to remain
challenging for better part of 2016. However, a material easing in FDI norms
and administrative efficiency in managing foreign investments could support
gross private investment. Again do not expect material improvement in 1H2016.
(c) Current equity market
conditions (little divestment potential), high real rates (expensive borrowing
and debt servicing for government), likely lower growth in indirect taxes, and
desire to maintain fiscal discipline do not augur well for material pick up in
public spending as well. As it appears today, only a global collapse will only
spur government stimuli.
(d) As discussed yesterday,
the global growth, especially in major trade partners of India (except US) is
not likely be encouraging. So no material improvement expected at export front.
In fact, a serious CNY devaluation (not unlikely) could hamper exports further.
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