Some food for thought
"Gods always behave like the people who make them."
—Zora Neale Hurston (American Dramatist, 1891-1960)
Word for the day
Malinger (v)
To pretend or exaggerate incapacity or illness (as to avoid duty
or work)
First thought this morning
The controversy over constitution of five judge bench for
hearing Ayodhya Sri Ram Mandir dispute is most unfortunate.
Mere thought that the religion of a Supreme Court judge might have
a bearing on his judgment (whatever the matter be), is contemptuous and
preposterous.
One can somehow understand the interested groups questioning the
constitution of the SC Bench. But senior journalists and politicians taking the
point of these groups forward is incomprehensible.
This is more important since no less than the prime Minister
himself has already indicated that if SC decision goes against the cause of Sri
Ram Mandir, the government may consider legislative action to undo the
decision.
Putting so much pressure on judges in matters of national
importance, will only further undermine the credibility of the judiciary.
In the instant case, no matter what the decision is, some are
going to see communal colors in that.
Chart of the day
Building UBI in investment strategy
Telangana is the first State in India to implement a Universal
Basic Income (UBI) Scheme for all the 6million farmers in the state. Under the
Rythu Bandhu Scheme, the state government offers to pay Rs8000/year to the
farmers of the state, irrespective of the size of landholding. The amount is
given by bearer cheque through Village Panchayat.
Commendably, before implementing the scheme, the State has made
all land titled good, by completely digitizing the land records and issuing new
fully secured title deeds (Land Pass Books) to all the farmers. All land
holdings records are transparent and could be digitally verified by anyone.
Arguably, this measure may not address any of the fundamentals
issues plaguing Indian farm sector. Nonetheless, it may at least ensure that no
one starves to death.
Telangana government's scheme for Universal Basic Income (UBI)
for farmers has recently found favor with the governments of Odisha and West
Bengal. It is only a matter of time when most other state governments follow
this scheme to protect their vote share.
There would be absolutely no surprise, if we see a promise to
implement such a scheme in the manifestoes of most parties contesting general
elections in summer of 2019. The regional parties may promise to implement the
same or similar scheme in their respective states. The national parties might
promise a pan India roll out.
A MNREGA like mega pan India UBI scheme for ensuring a bare
minimum standard of life for each farmer household can be clearly seen on the
horizon, within next five years.
Soon, a strong demand would rise from the non-farmer poor for
such basic income support.
As an investor I must evaluate whether my investment strategy
accounts for such a major fiscal event!
I would imagine that a pan India roll out of some sort of UBI
would entail merging or elimination of numerous schemes and subsidies.
Nonetheless, it would certainly cast material additional burden on the already
strained fiscal situation of the center and state governments. Given that most
populated states in the country (e.g., UP, Bihar, MP, Rajasthan) are already
fiscally challenged, this additional social spending would be at the expense of
new capacity creation. It would therefore reasonable to account for a
materially higher incidence of tax on corporate, discretionary spending, as
well high income households.
The basic income would be sufficient to add some demand to
consumer staples and things like Hawai Chappals. However, there may not be much
impact on the discretionary spending. It would not be unreasonable to believe
that the higher fiscal pressure might keep the rates at elevated level, further
pressuring the demand for discretionary consumption.
I would therefore like to update my models for the following:
(a) Higher overall
tax rates, more so in case of luxury and sin category.
(b) For companies
with stretched finances, elevated finance cost may stay for much longer than
earlier anticipated.
(c) Volume growth
for staples may sustain, but margins are unlikely to improve.
(d) Foreign flows
would be watchful, and may not rush to India anytime soon.
(e) Domestic flows
into market may suffer marginally due to higher incidence of taxation, both
direct and indirect.
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