Tuesday, August 14, 2018

Economic and market review - 3

"Truth stands, even if there be no public support. It is self-sustained."
—Mahatma Gandhi (Indian, 1869-1948)
Word for the day
Littoral (adj)
of or relating to the shore of a lake, sea, or ocean.
Malice towards none
If your child is using the same shoe for more than a year, it does not necessarily mean that he/she has become more responsible or careful. It may also mean that he/she has stopped growing.
 
First random thought this morning
Delhi High Court recently decriminalized begging. Henceforth, begging in Delhi will not be crime. Though, it is not clear if it makes begging a legitimate vocation and add to the number of job opportunities.
In the meanwhile, contours of New Delhi Smart City project finally defined:
High speed Wi Fi in Connaught Place Area (not Rajeev Chowk?!); 4 mechanical road sweepers; 2 litter picking machines; 10 Auto tippers; smart poles; solar tree; ideation center; 10 LED interactive screens; 2 hi tech nurseries and a garden; release of a book titled "Green and Colorful NDMC - A Transformational Journey".
Would be useful to note that NDMC area, being seat of the central government and host of all foreign missions, is the highest spend area in the country.

Economic and market review - 3

Most analysts and economists forecast Indian economy to grow between 7.2% and 7.5% in FY19 as well as FY20. Growing at this rate, India is popularly touted to be the fastest growing economy in the world. Nonetheless, the opinion around India's macroeconomic fundamentals has never been so vertically divided in past couple of decades at least.
On one side of the spectrum are the global agencies like IMF & ADB etc., and many international brokerages that rely primarily on the government propaganda for their opinion. This set of commentators and analysts have used hyperbole like "...an elephant that is ready to run"; "...a potential safe haven in global turmoil"; etc., to describe the state of Indian economy.
I personally am delighted to read the comments and opinions from this group. It makes me feel proud and good.
On the other side of the spectrum are many independent analysts, economists, senior bankers like Deepak Parekh, and industrialist like K. M. Birla etc., who believe that all may not be well with the Indian economy and macro fundamentals may actually be weakening gradually.
Drawing from the thoughts of both these factions, my views on the current macroeconomic conditions in the country are as follows:
(a)   Indian economy has mostly recovered from the disturbances caused by replacement of all high denomination currency notes in late 2016 (popularly termed demonetization); and implementation of a common nationwide Goods and Services tax (GST) to replace a plethora of state level and central taxes. Normalized for these two events, the economy continues to grow at a sub-optimal or below potential rate.
(b)   The capacities created in many core sectors during past decade or so are still not fully utilized. Despite marginal improvement in recent months, the visibility is still poor for fresh capacity additions in core sectors like telecom, power, railways, shipping, civil aviation, corporate banking, mining, capital goods manufacturing etc.
(c)    After expanding for couple of years, the government is shrinking its consumption as well as capital expenditure to sustain fiscal discipline.
(d)   The debt and reserve profile of government has worsened in past couple of years. The proportion of short term debt has risen materially as compared to the past episodes of external shocks, making India vulnerable to external shocks.
(e)    Current account balance is worsening, putting pressure on currency and yields.
(f)    Monsoon so far has been sub optimal.
(g)    External risks have risen materially in recent months.
...to continue on Thursday

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