Do it yourself

The International Monetary Fund (IMF) and the World Bank designed the Debt Sustainability Framework (DSF), to assess and manage the debt sustainability of low-income countries (LICs). DSF is a key tool in the overall global financial architecture. It analyzes a country's indebtedness and its vulnerability to shocks through regular analysis of a country's present and projected (over the next 10 years) debt burden. The analysis involves conventional solvency analysis (Debt to GDP, Debt to Export, Debt service ratio, fiscal balance, etc.) and stress testing for potential crisis situations. The idea is to detect potential debt crises early and implement appropriate preventive actions. DSF, inter alia, guides— (i)      borrowing decisions of LICs by assessing their financing needs and repaying abilities; (ii)     LICs how to maintain a balance between their development goals and financial stability; (iii)    the process of identifying countries un...

In the current week, the Delhi NCR region has recorded the highest-ever summer temperatures. The mercury kissed 50 Degrees Celsius. The residents are facing acute water and electricity shortages. The polling for the ongoing general elections in Delhi and Gurgaon was held on Saturday, the 25 th of May. Both cities recorded less than 60% polling. A lot of people cited scorching heat as the primary reason for not stepping out to vote. In that sense, extreme weather has now started to directly impact the health of our democracy. Surprisingly, the entire two-month-long election campaign; thousands of election speeches; 24X7 media debates; opinion pieces in newspapers; and zillions of social media posts and memes, appear to have mostly ignored this critical issue. Both national parties have incorporated their strategy to fight climate change and protect the environment in their respective manifesto. The Congress manifesto on environmental issues is much broader and seeks to deal with th...

Some famous finfluencers of social media have recently commented that some large-cap stocks have underperformed the benchmark Nifty50 in the past couple of years, while the earnings and balance sheets of these companies have improved decently. These stocks are trading well below their peak valuations. Many of these stocks are trading well below their 5-year median valuations. The finfluencers are arguing that valuations of these stocks shall witness a “mean reversion” soon and these could give 30 to 40% return without any further improvement in earnings or balance sheet matrices. The most popular example cited by these finfluencers is the share price behavior of ITC Limited in 2022-2023. I have no issues with these social media stars. I will be happy if large-cap stocks like HDFC Bank, Kotak Bank, Hindustan Lever, etc., outperform the benchmark indices and yield a 35-40% return. I am happy to ignore the fact that ITC has yielded a negative return in the past year. My small inquisitio...

  Last week I  had written ( see here ) about how the fourth letter of the English Alphabet “D” has gained prominence in the financial market jargon. In particular, I find three “Ds”, viz., Digitalization, Deflation and Demographics most relevant for the economy and therefore markets. A recent speech of Dr. Michael Patra, Deputy Governor of RBI, as published in the latest monthly bulletin of RBI ( May 2023 ), highlighted some more ‘D” factors that are ushering India into a new age. Besides demographics & Digitalization, Mr. Patra emphasized on Diaspora, Diversification, Diplomacy, Dynamic Federalism, and Decarbonization as key factors in transformation of the Indian economy. The following are some excerpts from his speech: Diaspora:  An outward reflection of India’s demographic bonus is the vibrant expansion of Indian communities across the world. Over the years, our perceptions about the diaspora have also transformed from ‘brain drain’ to ‘brain gain’, spurred by th...

Recently the government of India launched Mission LiFE (Lifestyle for Environment). The Mission is “designed with the objective to mobilise at least one billion Indians and other global citizens to take individual and collective action for protecting and conserving the environment in the period 2022–28. Within India, at least 80 percent of all villages and urban local bodies are aimed to become environment-friendly by 2028.” In the current fiscal year (2022-23) Mission LiFE is focusing on “Change in Demand, by nudging individuals, communities and institutions to practice simple environment-friendly actions (LiFE actions) in their daily lives.” Since the Mission LiFE has been launched in the 75th year of India’s independence, a comprehensive and non-exhaustive list of 75 individual LiFE actions across 7 categories has been identified by the NITI Aayog (implementing agency for Mission LiFE). ( see details here ) This is a brilliant initiative, inasmuch as it seeks to solicit activ...

 The US Federal Reserve has comforted the global markets with assurance of maintaining strong intent to control prices while not being unnecessarily disruptive in terms of monetary tightening. The markets are apparently reading a 0.9% contraction in the US economy in 2Q2022, as sufficient ground for the Fed to be mindful of the likely disruptive impact of the future hikes; given that the US economy is technically in recession after having contracted for two consecutive quarters in 2022. The marked slowdown in the economic activities in Europe and China; and easing of the global logistic bottlenecks has noticeably moderated the inflationary expectations, as reflected in the yield curves across the globe. The fears of 1930s type hyperinflation appear to have subsided, at least for now. The equity valuations are gradually adjusting to “above zero” and “neutral” interest rate regimes. The recognition of “positive rates” however is still missing from the popular narrative and hence re...

In the latest episode of global inflation, ‘climate change’ is one of the key players. It has significantly impacted the supply and demand equilibrium of many commodities and services in a variety of ways. For example— (a)   Notable changes in weather patterns have adversely impacted the crop production and livestock supply globally, resulting in sustained rise in food prices. (b)   The global commitment to fight climate change has resulted in a significant rise in investment in clean energy and clean technology; mostly at the expense of investment in conventional energy. Most countries are aiming to achieve ‘zero emission’ in the next 3 to 4 decades. In the transition period, obviously the supplies of conventional energy shall remain constrained for the lack of adequate investment, tilting the scale in favor of higher prices. Sharp surge in coal and crude oil prices (even adjusted for logistic challenges due to Covid) is indicative of this. (c)  ...

  The latest edition of the World Economic Forum’s global risk report ( The Global Risk Report 2022 ) offers some valuable and interesting insights into the current global risk perceptions and areas of concern. The key message is that “A divergent economic recovery from the crisis created by the pandemic risks deepening global divisions at a time when societies and the international community urgently need to collaborate to check COVID-19, heal its scars and address compounding global risks.” The clear and present global challenges include “Supply chain disruptions, inflation, debt, labour market gaps, protectionism and educational disparities are moving the world economy into choppy waters that both rapidly and slowly recovering countries alike will need to navigate to restore social cohesion, boost employment and thrive. These difficulties are impeding the visibility of emerging challenges, which include climate transition disorder, increased cyber vulnerabilities, greater barr...