"My idea of
absolute happiness is to be in bed on a rainy day, with my blankie, my cat, and
my dog."
—Anne Lamott (American, 1954)
Word
for the day
Me-tooism (n)
The adopting of policies, methods, products, etc., similar or identical
to those of a peer, rival, or competitor.
Malice
towards none
Rajan's Exit -
"Rexit".
Patel's entry -
"Pentry"!
First random thought this morning
After BJP was reduced to 2 Lok Sabha seats in 1984, it took a
countrywide Rathyatra and demolition of a structure in a small dusty town at
the banks of river Saryu in Eastern UP (popularly known as Babri Mosque and
Birth Place of Lord Rama) to resurrect the fortunes of the party.
Now we are down to 2 medals in Olympic, after a rather surprising
6 in 2012 London Olympics. The morale of the players and coaches must be
thoroughly destroyed, notwithstanding the celebrations over Malik-Sindhu
achievements.
What would it take to restore this morale? Certainly not a
government committee!
From "darkness" to "light"
Never in my life I have seen so much
reluctance to accept payments in cash in India.
Empowered with advanced
technology, data access and favorable legal & regulatory framework, the
taxmen appear increasingly fearless and less compromising. Adding to the
taxmen's aggressive pursuits is the worsening law & order conditions in
large parts of the country that is making burglars, robbers and ransom seeker
etc. increasingly fearless and more adventurist.
The small traders and businessmen
are thus finding it extremely difficult to conduct their business in the
"conventional" way. Full implementation of GST may mark a watershed
for these businesses.
This is in fact a great news for
the long term health and prospects of the economy. But the disruption in near
term could be perilous for a majority of this group - that has so far
successfully avoided compliance with tax laws.
The argument that the government
should have planned the transition from "non-compliance & partial
compliance to full compliance" in a gradual fashion is not only hollow but
also appear flirting with immorality. Blaming the "system" for
non-compliance is not a sustainable defense, either.
Indubitably, the near term
implications of this shift from "black" to "white" to
"darkness" to "light" may however be material.
On economic side, this move away
from cash economy is leading to tighter liquidity resulting in lower
inventories, poor channel credit, lower capacity additions, unemployment and
distress liquidation in business as diverse as FMCG and real estate. Both the
leaders in FMCG space - Dabur and HUL, did hint at this phenomenon in their
recent presentations.
On the political side, this might
alienate the small business and traders, who have been traditional supporters
of BJP, away from the party and likely in the Congress camp. Although as of now
there is little evidence of this.
In my view, investment
implications of this phenomenon could be as follows:
(a) The businesses like FMCG, real estate, housing material, auto
component, domestic pharma etc, where
cash transaction have been material part of the trade might have to compromise
on margins to grow - partly financing channel inventory and compliance cost.
(b) The organized retailing may grow faster than earlier estimates.
(c) Loan defaults, unemployment, and distress deals may rise.
(d) The credit growth of NBFCs and Banks may not truly reflect the
economic growth.
(e) GST implementation may see lower economic growth in the initial
phase.
No comments:
Post a Comment