Do it yourself

The much publicized and even more widely criticized Rs20trn Self Reliant India economic recovery package has laid significant emphasis on the farm sector reforms. The following 10 key promises have been made as part of the package. 1.     Essential Commodities Act to be amended to enable better price realization for farmers by attracting investments and making agriculture sector competitive. 2.     A central law to be enacted to provide for inter-state trade and framework for e trading of agriculture produce. 3.     The government to facilitate appropriate legal framework for an enforceable standard mechanism for predictable prices of crops at the time of sowing (some sort of contract farming or forward pricing mechanism). 4.     Financing facility of Rs.1Lakh Cr to be provided for funding Agriculture Infrastructure Projects at farm gate & aggregation points (Primary Agricultural Cooperative S...

A popular saying is that "the true character of a person is often revealed in the times of crisis". The crisis tests intellect, common sense, resolve, grit, emotions, beliefs, etc. of people, besides highlighting their strengths, weaknesses and vulnerabilities. This applies mutatis mutandis to various organizations and systems also. The present crisis, for example, has highlighted the strong character of the common people of India who are usually financially insecure (poor), less educated (or illiterate), religious (and superstitious), and oppressed. Often derided by the elite as dirty and non-compliant, these people have shown amazing resilience and grit. They have bore the brunt of economic consequences of the disease; faced cruel apathy of the administration & state (and in some cases employers also); have been most vulnerable to fatalities due to COVID-19 infections; and still managed to stay peaceful and non-violent. Thousands of them received anim...

Post budget presentation of Union Budget for FY21 on 01 February 2020, I had cautioned the investors to avoid becoming victim of their own expectations ( Mr. Market victim of his own expectations ). From the reactions over the mega Rs20.97trn stimulus package, coming from the various market participants, it appears that perhaps no one has heeded to my suggestions. The market participants in particular, and the public in general, appear disappointed, dismayed and disillusioned by the policy measures announced by the finance minister in five tranches last week. The set of policy measures has been analyzed threadbare by numerous experts, commentators, and various stakeholders, using zillions of gigabytes of data. Had the newspaper being published regularly, millions of reams of paper would have also been used by now in analysis and criticism of the set of policy measures announced. I shall therefore refrain from further analyzing the series of announcements made by the financ...

In past 50 days of lockdown, I had a chance of interacting with numerous professionals, investors and businesspersons. The general environment is that of anxiety, fear and pessimism. The promise of a meaningful economic stimulus by the prime minister seems to have rekindled some hopes. Though greed usually accompanies hopes, as of this morning, the fear still continues to be the dominating factor in influencing the investment decisions. In my view, the following three are the primary sources of rising hopes: (a)    The prospects of total collapse in economic growth and consequent high stress in the financial system is prompting RBI for an aggressive monetary easing. Easing inflation and government’s resolve to bring back the economy on growth path is also helping the sentiments. (b)    There is abundant liquidity in the financial system. As of 6 May 2020, banks had deposited over Rs8.6trn in RBI's reverse repo window @3.75%. The banks have be...

Continuing from yesterday ( see here ) Many readers have asked a very pertinent question, viz., "why the stock prices are not reflecting the economic reality?" It is a common knowledge that the outbreak of COVID-19 pandemic and consequent socio-economic shutdown has caused extensive damage to After pondering over this question for many days, I have reached the following conclusions: All financial assets (Bonds, Equity, MF Units, Derivatives etc.) have two clear manifestations - (i) Interest in some underlying business(es) or loan to some underlying business with or without a charge on the assets; and (ii) independent commodity without any regard to the any underlying business or asset. When someone buys equity shares of a company with the intent of acquiring an interest in the underlying business of that company, he is considered an investor in that underlying business. He may use the services of stock broker or may buy directly from the company ...

Thirty years ago, the period between May 1990 and December 1990, was a watershed in global social, political and economic order. In the 7 months, the world changed the most in the post WWII era. For India, in particular that was a defining period in post independence history. In global context, some of the key events that took place in those seven months included the following: (a)    Apartheid ended in South Africa, marking the end of one of the darkest chapter in world history. (b)    The process of USSR dissolution begins. The Supreme Soviet of the Soviet Union grants Gorbachev special powers to secure the Soviet Union's transition to a market economy. (c)     Soviet Union collapse marked the end of a bipolar world that had divided the world in two camps in post WWII era. In the subsequent two decades, USA would reign over the world as the only super power. (d)    End of cold war between USA and USSR with...

Continuing from Wednesday ( see here ) Not long back in the global history, aluminum was thought to be more precious than gold. Most powerful kings were served food in aluminum utensils while the lesser knights had to do with gold flatware. The sudden change in the value of aluminum took place when much cheaper means of refining the ore became available. Suddenly, it was disposable – as in aluminum foil or cola cans. In no time it transformed from most expensive thing in the world to garbage. Similarly, in African continent for long common salt remained a more prominent store of value and medium of exchange than gold. For past two centuries though gold has been globally preferred as a store of value over another commodity, primarily for its limited supply and physical traits that make it indestructible. However, in past four decades, the demand of gold for storage of value, vanity, social & financial security, and religiously important object shall has diminished. In my ...

The jokes & memes on coronavirus are now getting stale. The opening of liquor shops and hike in duty on transportation fuel has provided some new fodder to the meme and joke writers. But the new jokes are more ironical than funny. This clearly indicates that the people are now tired & frustrated to the extent that they are now willing to risk their life to get back to their pre lockdown status. The government however appears to be caught in a quagmire. It is finding it extremely challenging to strike a balance between (a) the urgent need to augment resources to compensate for the poor revenue collection in past 5 weeks; (b) to provide meaningful stimulus to the businesses facing unprecedented liquidity, solvency and viability crisis; (c)           support consumers who have lost income; (d) make concessions for the businesses to attract new investment; (e) restore confidence of people who psyche has been damaged; and (f) c...

Continuing from yesterday ( see here ) Before I share my thoughts on USD and Gold, I would like to make it clear that I am a simpleton who: (a)    does not understand the economics beyond its first lesson which says all economic decisions involve a trade off and price of things having economic value is determined by their demand and supply at that given point in time; (b)    does not know how to play with data on Microsoft Excel Sheet; (c)     likes to discover investment themes in streets, markets and fields; and (d)    seriously believes that numbers invariably follow the good story. In my view, the currency of any country is nothing but an “unsecured zero interest bond” issued by the respective central bankers. This bond usually loses its value with the passage of time due to inflation. Since 2008 global financial crisis, central bankers in the developed world, especially US Federal Reserve ...

Last week, I had shared latest update relating to my investment strategy. I had highlighted that we may be standing at the threshold of a new economic and market cycle. The global economics, politics and markets may change rather dramatically in next couple of years, in the aftermath of the current crisis. I have therefore decided to reorient my investment portfolio to suit what I believe could be the shape of the new world. ( see here ) Many readers have expressed surprise on my decision to (a) raise the weight of equities in my asset allocation; especially at this point in time when almost everything appears uncertain and future is shrouded in thick black clouds; and (b) prefer Neutral currencies like Cryptos over USD and Gold. I would like to address the inquisitions of the readers as follows. It is pertinent to note that I have been expecting a paradigm shift in the global markets for past 5 years now ( for example see here ). Especially in past 5 years there have ...

A recent study by the Canada based International Institute of Sustainable Development has highlighted some interesting trend in the energy subsidies in India. The report titled "Mapping India’s Energy Subsidies 2020" examines how the Government of India (GoI) has used subsidies to support different types of energy. As per the findings of the report, the following five key changes mark the shift in India's energy subsidies in recent years. 1.     Oil and gas subsidies up by over 65%. This rise—from INR 40,762 crore (USD 6.1 billion) in FY17 to INR 67,679 crore (USD 10.07 billion) in FY19— is largely driven by higher oil prices and growing use of subsidized liquefied petroleum gas (LPG). 2.     Renewable energy (RE) subsidies down by 35%. RE subsidies fell from a high of INR 15,313 crore (USD 2.3 billion) to only INR 9,930 (USD 1.5 billion) in FY 2019. This reflects falling RE costs but also a slowdown driven by policy decisions such as...