Do it yourself

  In the latest union budget presentation, the finance minister placed special emphasis on the need to encourage private sector investment. The finance minister highlighted that catalyzing (crowding-in) private sector investments through public capital expenditure is one of the key goals of the government in its endeavor to attain its long term vision “India at 100”. In the past one year there have been some brokerage reports emphasizing that a virtuous private capex cycle in India is on the anvil. Most asset management companies also emphasized on revival of economic cycle led by For example consider the following: 2022: The Year of Capex - IIFL Securities “India is on the verge of a strong capex led growth acceleration, helped by a multitude of factors including a supportive domestic policy environment and a strong commodity cycle. “ “India should see industrial capex pick up in 2022, helped by a pro-business and reforms govt stance, catch up after a long period of underi...

  The Capex conundrum One of the most praised features of the Union Budget for FY23 presented last week is the emphasis on capital expenditure. The government, industrialists, bankers and many market participants have highlighted that the sharp rise in allocation for capital expenditure in the budget shall catapult the economy into a higher growth orbit and accelerate the employment generation. Incidentally, the allocation for capital expenditure in the budget is also one of the most criticized items. Experts have highlighted that the higher allocation for capital expenditure in the budget is not only an optical illusion but may also be misdirected as it is mostly focused on the transportation sector and defense and completely ignores priority sectors like tourism, food processing, bio technology, higher education, sports & youth affairs, etc. The opaqueness in the matters of capital expenditure also raises doubts over the government's commitment to transparency in accounti...

After struggling to understand the economic survey and budget documents for more than 36hours, I have concluded that at least in matters of government, ignorance is actually bliss. In my view, a presentation that makes overwhelming use of technical jargon, complicated arguments, and statistical manipulation, usually implies lack of conviction in the presenter. Moreover, a presentation which does not take into consideration the comprehension level and linguistic abilities of its audience is a futile exercise. Usually such presentations are the outcome of either poor communication skills of the presenter; or mala fide intent of the presenter. Presenters tactically overuse technical jargon and complicated arguments to overwhelm the audience so that they could be distracted from noticing the shortcomings. In my view, the latest budget and economic survey are clear cases of poor communication. They follow the principle of “Form over Substance”, as these conceal more than what they reve...

The finance minister presented the union budget for FY23 this morning. The 90minutes speech was apparently the shortest budget speech delivered by the incumbent finance minister. There is little doubt that the presentation of both the budget and economic survey are smartly aimed at markets and investors. The two fundamental ideas underlying the budget speech appear to be – (i) the government is now in a hurry to catch the digital train it has been missing for past more than a decade; and (ii) the government is earnestly keen to plug the leakages and loopholes in the taxation system. Though the budget speech and economic surveys have made overwhelming use of digital and management jargon, signifying that professional managers are now running the policy defining exercise at North Block, I would try to derive the key message from the budget in common man language. Positive take away The three best features of the Union Budget for FY23 are perhaps The general status quo on tax ra...

 Let’s consider India as a company; annual budget as the annual account for the current year and forecast for the next year and the budget presentation in the Parliament and subsequent press conference as the conference call with various stakeholders. An investor who wants to invest in this company would want to objectively analyze: (i)     The past performance of the company in terms of growth; (ii)    The credibility of the management in terms of professionalism, integrity, execution and delivery on promises; (iii)   The future prospects in terms of growth, competitiveness, financial stability, cost of capital, price stability, etc.; and (iv)    The relative positioning in terms of expected returns, access to markets, regulatory flexibility, costs (taxation etc.). The past performance of the Indian economy in terms of growth has not been particularly outstanding, especially in the past one decade. The growth trend appears to hav...

  Expectation is a strange animal. More you beat it, the stronger it rises. Consistent underachievement is perhaps the only way to kill it. This is that time of the year when everyone gets an opportunity to express their wishes to the finance minister. Even though there is no empirical evidence to suggest that the finance minister would oblige even a significant minority of aspirants – not because she does not want to; but simply because she cannot. Contours of the annual union budget It is important to note that the finance minister of India is like the CFO of a business corporation. Her job is to keep account of the receipts and expenditure of the government; manage resources necessary for executing the plans approved by the Cabinet; ensure optimum utilization of available resources; and keep adequate provision for meeting the contingencies. She is accountable to all the stakeholders, insofar as the transparency of accounts is concerned. Her discretion is however limited ...