Some food for thought
Has anybody ever seen a dramatic
critic in the daytime? Of course not. They come out after dark, up to no good.
—P. G. Wodehouse (British
Writer, 1881-1975)
Word for the day
Tergiversation (n)
Evasion of straightforward action or clear-cut statement
Equivocation
Desertion of a cause, position, party, or faith
First random thought this morning
Somehow "Ambani" has become a dirty name in the
political lexicon of India, though not so in the common parlance. I have been
running a reality check with common people on "Ambani". The politicians,
especially those from Congress and left parties, may certainly not like what a
common man thinks about Ambani in general.
Believe it or not, Reliance Jio may have enabled more people
than all the governments in past 25years would have done together. An
increasingly large number of people from the economic fringes of the society
are benefitting from very cheap but good connectivity. A Jio enabled phone is
not only a communication device; it is in fact work place, market place and
also a social hangout for them.
They no longer give "missed calls" and keep waiting
for revert. They don't stand in long post office queue to send money orders
back home. They are able to market their product and services effectively. They
are "aware" of most new political, social, economic, and
technological developments. "Conference calls", "Samples",
"Work experience credentials" etc. are no longer prerogative of the
elite.
The retail format Reliance Trends, is also mostly geared mostly
towards lower middle class population and provides a decent value for their
money, besides adding materially to their esteem value in terms of shopping
experience and style.
I personally do not like to invest in Reliance Industries, or
commend the social conduct of the Ambani family. Nonetheless, denying their
economic contribution to the poor would be a crime. I hope, someday our
government would recognize it adequately.
Looking for opportunity in politics
As the date for some key state elections draws near, the
interest of market participants in the emerging political situation is rising.
These state elections, like always in past two decades, are being watched
keenly as indicator of the likely outcome of 2019 general elections. In 2013,
BJP won comprehensively in three central Indian states of MP, Rajasthan and
Chhattisgarh and went on to win a landslide victory in 2014 general elections.
I have always maintained that there no credible evidence
available to suggest any correlation between the outcome of any election and
Indian economy or financial markets. Post independence, the evolution of
economic policy and markets has been a slow but consistent process.
Especially in past three decades, all governments have followed
the same policy framework for development and growth, with highest emphasis on
decontrol, globalization, inclusion & social equity. Besides, the
advancement in technology has been used to bring transparency in
administration.
The changes have been mostly gradual and incremental. The pace
and direction of the change has varied according to the macroeconomic
conditions, which in fact have mostly been a function of the global economic
cycles. During periods of slow growth, policy changes have been focused on
decontrol and globalization. Whereas during periods of high growth, the greater
emphasis been placed on inclusion and social equity.
Two extreme situations in 1991-93 (balance of payment crisis)
and 1998-2001 (economic sanctions post nuclear test and dotcom bubble bust)
caused substantial acceleration in decontrol and globalization. In 1991-93
India had a minority government of Congress Party and in 1998-2001 India had a
multiparty coalition led by BJP.
No government and/or political party (or a coalition thereof)
has ever tried to disturb the status quo by introducing any disruptive changes
(or reforms if you like it!) in the economic policies. The evolution of
economic policy framework has been incremental and consistent.
Also, no government has so far managed to break away from the
prevalent global economic cycle and produced any path breaking counter cyclical
growth. Arguably though, there are few instances where Indian economy has missed
the opportunity to partake in global economic upturn (e.g., in 2015-17).
A change like GST that may look disruptive at first glance, is
commutative outcome of gradual incremental changes since 1985-87 in factor like
(a) tax regime, (b) technological advancement; (c) availability of bandwidth
and electricity; (d) integration of Indian economy into global economy; (e)
organized sector in domestic trade and commerce; (f) interstate trade,
especially due to decentralization of manufacturing to backward areas; and (e)
federal cooperation especially the sharing mechanism of revenue and development
expenditure amongst center and states.
I continue to believe that this trend shall continue
irrespective of the form and constitution of government in any state or at the
center. Accordingly, I assign no importance to politics in my investment
strategy.
Nonetheless, concerns over the outcome of elections have
bothered the market participants, for whatever reasons. These concerns have
usually caused higher volatility and wild price movements in markets. To this
extent I am interested in outcome of these state elections and the subsequent
general elections. Any probability of regime change may provide me attractive
entry points for investing in businesses, where I want to invest anyways.
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