Do it yourself

The economic data for 2QFY20 will be released today evening by the Central Statistics Office (CSO). There is a near consensus that this data may not be good. The estimates of various agencies and institutions are ranging between 4% to 4.8% growth in real GDP over 2QFY19 (vs. 5% in 1QFY20). 2QFY20 is expected to be the sixth straight quarter of decline in growth rate, the longest span of decline since 2011-2012. Since this data belongs to the quarter ended September 2019 and the financial performance of the businesses for that quarter is already in the public domain, it is reasonable to assume that the financial markets have assimilated the poor growth numbers quite well. However, the growth estimates for corporate revenue and profit for 2HFY20 may not be factoring a negative surprise. Going by the forecasts of most analysts and economists, the growth estimates of 2HFY20 are not very encouraging; though the consensus is expecting the second half of the year to be better...

If someone wants to understand the "unease of doing business & living" in India, a 45-50km drive in and around the city these days is a great idea. You would find long queues of vehicles at FASTag distribution counters. Last late evening, I found many poor taxi and small commercial vehicle drivers waiting for their turn to obtain a "prepaid card". A couple of them said that they joined the queue at 7:30 in the morning. Their turn did not come till 10AM. They left and rejoined the queue at 8:30PM. They were not sure if they would get it by the night. In principle, the FASTag is a "prepaid card" that is used to pay toll charges across the country. This is a substitute for cash payment at toll booths. The primary purpose of this facility is to reduce the time spent by vehicles at toll booths. The secondary objectives may include (i) preventing the leakages in the toll collection; (ii) encouraging digital payments; (c) making toll ...

To understand the current state of automobile market in India, we met numerous people in the supply chain, users and prospective buyers over the last few days. Both rural and urban markets were covered in 4 states - UP, Haryana, Punjab and Delhi. The key takeaways from my discussions could be noted as follows: (a)    A sizable number of existing 4W passenger vehicle (4WPV) users has postponed their replacement decision in past one year. Most of the users who have replaced their vehicles in past one year have up traded. SUV still remains a preference in rural area. (b)    Almost 65% prospective 4WPV buyers (mostly first time buyers) of entry level vehicles have postponed their decision to buy. Most of these prospective buyers are not likely to buy in next 6 months also. The postponement of decision is due to a variety of decision - economic uncertainty (job, profession or business), poor availability of credit, buying vehicle decision linked to ...

There are usually three types of customers for any product or service: (i)     Dog type - The customers who are attached to the people and/or the brand. For example, the people who prefer their hairs to be cut by the same person in a large saloon; to be served by the same waiter/waitress in a restaurant; to buy the same brand of clothes, food, etc. These customers would usually not mind paying higher price or waiting longer to get the product or service of their choice. (ii)    Cat type - The customers who are attached to a place rather the people or brand. For example, the customers who prefer to shop from a specific store, watch movies at a particular theater, spend their whole life in one house, etc. These customers also usually would not bother about the offerings of the competitors. (iii)   Rat type - The customers who are always looking for a favorable deal. They usually have no loyalty to any place, brand or people. They keep a...

I find the following four narratives are presently dominating the financial market research in India: (1)   Slowing economic growth India's economic growth hit a six-year low of 5% in 1QFY20. The consensus estimates indicate that the growth may further slip even to below 5% in 2QFY20. Some estimates are forecasting that the 2QFY20 GDP growth, to be announced next week, may be closer to 4% rather than 5%. The full year growth number, after accounting for base effect and recovery in 2HFY20, are also expected to remain closer to 5% rather than 6%. The slowdown in economic growth is widespread, encompassing all the segments and sectors of the economy. Agriculture, industry and services have all slowed down. Investment and consumption demand is multiyear low; and so are savings, investments and credit growth. The financial research is adequately capturing the slowdown since August when 1QFY20 GDP growth numbers were announced. However there are still differe...

The recent order of the Supreme Court may finally end one of the ugliest chapters in the corporate history of independent India. With sale of Essar Steel Limited to ArcelorMittal S. A., the new paradigms in the Indian corporate business and financial market spheres that had been taking shape since past few years may get formalized and gain wider acceptance. The businessmen shall accept that they may no longer remain in control of their businesses if they fail in honoring their debt commitments; and shareholders shall realize that if lenders of a business lose money, nothing shall be left for the equity shareholders. There is a lesson for the small investors who buy stocks of defaulter companies because they are trading at very low price. Under the new paradigm the equity shareholders should expect to get anything only and only if the lenders are able to realize full value of their loans. The theoretical definition of equity shares (Upon liquidation of a business, the e...

Last month the hon'ble President of India issued a very important piece of subordinated legislation titled "the National Institution for Transforming India (Staff Car Driver) Recruitment Rules, 2019" ( see here ). These rules have been issued in suppression of "the Planning Commission (Staff Car Driver) Recruitment Rules, 2010". The objective of issuing these Rules apparently is to prescribe the method of recruitment, age limit, qualifications and other matters relating to the recruitment of car drivers for the staff members of the National Institution for Transforming India (NITI Aayog). As per the rules, the entry level driver needs to be 10th pass with a valid driving license and 3yrs driving experience. Experience of serving as home guard or civil volunteer for 3yrs is desirable but not mandatory. The only disqualification prescribed is that the candidate must not have practiced bigamy, unless the Central Government is satisfied that such ma...

Notes from my Diary The first and often most crucial stage of finding solution to a problem is usually the "acceptance" that there is a problem. Till very recently the government and its various organs appeared mostly in denial steadfastly refusing to accept that— (a)    the country is facing a economic slowdown; (b)    the slowdown is structural in part and may not correct on its own without intensive policy intervention; (c)     the slowdown is wide enough to impact the most sectors of the economy and deep enough to impact almost sections of the society; (d)    the slowdown is caused by both domestic and global factors and may need comprehensive coordinated efforts at fiscal, monetary, trade, geo political and strategic policy levels; and (e)     the fastest rate growth is not fast enough for an economy having the largest number of unemployed, under employed, and employed in disguise y...

A recently published paper by the RBI ( see here ) highlights the perceptible change in the macroeconomic outlook of the professional forecasters, in recent months. The latest round (September 2019) of the professional forecasters' survey (PFS) indicates that professional forecasters are growing increasingly skeptical about the macroeconomic conditions and growth in near term. I believe that in the next round of PFS (November 2019) we shall see further downward revision in the estimates as the data continues to deteriorate. In my view, the professional forecasters play a critical role in policy formulation and the quality of policy response to critical economic conditions. The fact that in the latest episode the professional forecasters have been quite slow in recognizing, underlines the inadequate policy response so far. The positive take away is that the realization of the gravity of situation is finally happening and it may hopefully reflect in the policy respon...