"The only way not to
think about money is to have a great deal of it."
—Edith Wharton (American,
1862-1937)
Word for the day
Ad absurdum (adv)
To the point of absurdity
Malice towards none
Silence was never so
glittery as it is today.
#Manishankar Iyer #
PChidambram #GVLNarsimharao
First random thought this morning
China is still far from being recognized as a developed economy.
Nonetheless it has started behaving like one. Ignoring short term concerns, it
is acting ruthlessly to check pollution and spiraling debt. It is keeping its
currency stable, and continues to open its markets. It is assertive on geo
political issues and shown great ambitions in terms of CPEC and OBOR.
We certainly have many lessons to learn from Chinese, keeping all
our prejudices aside.
Prelude to Union Budget - 1
I spent the weekend reading
reports published by various market participants highlighting what they expect
from the Union Budget for FY19 to be presented day after tomorrow.
In all I read 23 reports. I found
all the report unusually similar in their content, expectations and forecast.
The jargon used was insipidly the same. "Rural Income", "2019
General Election", "Housing for All", "Power for All",
"Roads" and "Fiscal Tightrope" were the most common terms
used in all these reports.
There is stark divergence in views
relating to the likelihood of changes in tax provisions relating to Long Term
Capital Gains and Inheritance (Estate Duty), the two issues that are being most
discussed and feared about by the market participants and financial media. The
dominant view is that the finance minister will maintain status quo on these
issues to keep the markets in good stead. The minority view is that while the
exemption for LTCG may stay, the minimum holding period may be increased to
bring parity between equities and other assets. However, none believes that
LTCG exemption will be withdrawn completely.
All the report relied heavily on
the government statements, promises and various documents and lacked in any
originality.
This confirms my view that Union
Budget is no longer a critical event in the economic calendar of the country,
as none of the analysts/economists seem to have put any material effort in
preparing these reports.
In short, the consensus view on
budget could be summarized as follows:
(a) The government may maintain fiscal deficit target at 3.2%, and
project higher tax revenue growth (both GST and Income/Corporate Tax) and even
larger disinvestment target.
(b) The focus of the budget will be rural voters. Expect higher
allocation for rural housing, rural electricity, raising farm income
(productivity - micro irrigation, farms inputs; pricing, and profitability).
(c) Roads and Railways will continue to dominate the infra spending.
(d) Export sector may be given additional incentives to improve
worsening trade account situation and create additional employment.
(e) The elections to many large states scheduled to be held later
this year, and the next general elections due in May 2019 shall have
significant bearing on the budget.
(f) No major change in tax rate is likely. Most changes in tax laws
would be administrative in nature aimed at improving compliance and ease of
doing business.
Tomorrow I shall share my
perspective for the FY19 Union Budget, for whatever worth it is.
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