Do it yourself

Scooty (e.g. Activa) and mobile phone have empowered women more than any policy initiative or legislation. People were least sure as to how reform in power sector, insurance, banking, financial markets, FDI in retail trade, Direct Tax Code, sugar decontrol, highways development, disinvestment etc. would impact their lives.  Most traders in all states except Goa were quite wary of the GST. During our road trip to six states including the poll bound states of Karnataka and Delhi, we tried to assess the views of the common people about economic reforms – relevance, need, direction, perceived benefits etc. We discussed with numerous people to find out (a) what has happened in past decade or so that has made difference to their lives (for good or worse); and (b) what would they want the government to do immediately to improve their lives. Without leading them to any specific direction, we kept the discussions primarily centered around their day to day life and...

Corruption does matter positively to us, as it helps in circumvent the law and get our way. Not the way crusader like Anna Hazare would like it to matter. No one minds corruption if his child gets admission in a good school/college through backdoor; if he gets his passport without waiting in queue; if he can construct an additional room in his house without permission; if he could encroach upon the pavement in front of his house/shop; if he can dig a deeper borewell in his house or put a powerful motor in his water supply line when his neighbors’ taps go dry. Most office goers in Delhi were happy with the flyovers constructed during the CWG. They have long forgotten and forgiven Kalmadi and other people responsible for putting the nation to shame. Once the home minister of a state visited the Jail on the Independence Day. After finishing his speech, he asked the inmates about their problems and what he could do for them. Most complained about mosquitoes and quality of fo...

Besides Delhi and Karnataka, we covered the states of Goa, Maharashtra, Punjab and Haryana in the first phase of our nationwide survey. Goa The best part of the journey so far has been the trip to Goa. We mostly focused on rural Goa, away from white sand beaches and luxury resorts. After an extensive 3day trip covering over 1000kms, we discovered that the popular debate on sustainable development model might be completely misplaced. While we often hear about the Gujarat vs. Bihar model of development, in our view Goa indeed presents a good example of sustainable inclusive development. We found people generally happy; infrastructure excellent; education system exemplary; police surprisingly courteous, friendly, honest and firm on the compliance; communities in harmony; and growth inclusive. Insofar as the political mood is concerned, for a change, most people were found satisfied with the establishment. BJP should be advised to showcase Goa more prominently in the national ...

BJP appears losing in Karnataka, but there is no Congress wave. BSY appears headed towards political oblivion ala Kalyan Singh in UP. Delhi will be a close contest between BJP and Congress. BSP could surprise with 3-5 seats in 70member assembly. Drinking water is main problem in both states. Rise in unemployment and crime due to mining ban and draught are real concern in Karnataka. CWG scam/shame appears mostly forgotten/ forgiven. Women security, inflation and corruption are not real concerns for the people in Delhi despite media blitzkrieg. In past four weeks our team travelled extensively in the poll bound states of Karnataka and Delhi. While these two states have a little in common, the indifference of common people towards political establishment was too stark. The corruption, contrary to popular perception, was not a real concern though in Delhi it was major topic of discussion. The key points noted during these interactions and general observations were as follows: ...

In February this year we had conducted a small impromptu survey to assess the political mood of people across the country, with special regard to “Modi vs. Rahul” debate. ( see here ) Encouraged by the response of the readers, we have decided to conduct a comprehensive ground level survey covering 16-18 states to assess the political and economic mood of the people. The survey began early this month and shall be completed in two months in three phases. Our team will be travelling through various states across the country to assess the mood of the people, their top concerns and expectations from the political establishment. The basic idea is to form an assessment regarding likely political formation post 2014 elections and the likely impact on the economy. This exercise is completely different from popular opinion polls, inasmuch as our team shall not be carrying any pre-structured survey questionnaires with pre-defined respondent sample in mind. We shall be informally ...

As we all know before the turn of the last Century, 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. In past couple of weeks we have received numerous queries from many readers about the strategy for gold; some of these being panic struck. The underlying theme was the fear that the gold might have taken a wrong turn on the path that follows aluminum journey to south. We asked the following three questions to some of those who were most jittery. (a)    Did you INVEST in gold? If yes, what prompted you to do so? (b)    Have any of the assumptions that prompted you to invest in gold chan...

The young demography is famously the biggest strength of Indian economy at this point in time. However, the rise in incidence of social unrest and violence; spread of Naxalism; rising unemployment and serious deterioration in the skill level of the educated youth suggest that if not managed properly this may as well prove to be the nemesis of the fabled India story. There could be no argument on the fact that Indian growth in past two decade or so has miserably failed in creation of adequate productive jobs for the burgeoning workforce of the country. MNREGA has helped to some extent, but it is bound by fiscal constraints, leakages and lower productivity. Disguised and underemployment also continue to impact the productivity and earnings potential. In our view, in spite of fully recognizing the potential of the youth and the problems faced by them, successive governments have mostly failed in implementing an integrated youth policy that would focus on harnessing this treme...

Energy deficiency had been one of the primary reasons for India’s fiscal and trade deficits. Failure in implementing an integrated energy policy has been a major failure of policy making. It is widely recognized that “roof top solar panel” has the potential greater than the one seen in mobile telephoney in past one decade. Reducing energy intensity of water and developing a world class public transport infrastructure on priority basis, especially in tier II and III cities, and strict legal enforcement of energy efficiency should be considered. The draft report of the Expert Committee on Integrated Energy Policy set up by the Planning Commission submitted in December 2005 explicitly stated that “India faces formidable challenges in meeting its energy needs and providing adequate energy of desired quality in various forms to users in a sustainable manner and at reasonable costs. India needs to sustain a 8% to 10% economic growth to eradicate poverty and meet its economic ...

In the last five decades, policy towards private foreign capital has moved closely with exigencies of India’s external payments position, and with changing official perceptions of the role of foreign capital in alleviating or exacerbating that position. The early liberalisation of the late 1950s was in part motivated by a balance of payments crisis. The restrictive regime of the 1970s, and FERA in particular, was influenced by the belief that excessive remittances of foreign enterprises were worsening a precarious balance of payments position. The gradual liberalisation of the 1980s and the major reforms of the 1990s were, to different degrees, responses to external payments difficulties. Recent spate of FDI liberalization (Retail, Civil Aviation etc,) is also mostly driven by the ominously placed CAD conditions. There could be little argument on the fact that the changing structure of India’s socio-economic milieu require tremendous amount of capital investment. The d...

A midway diversion to nowhere - II: Disinvestment In spite of full recognition of the pertinence of limiting government’s role in business to core and strategic areas and exiting all non-strategic businesses successive governments have failed in achieving the stated objectives and targets. The February 2002 President address to joint session of the Parliament categorically admitted that “Learning from our experience, especially over the last decade, it is evident that disinvestment in public sector enterprises is no longer a matter of choice, but an imperative. The prolonged fiscal hemorrhage from the majority of these enterprises cannot be sustained any longer.” The primary reasons for the abject failure, in our view, are (a) lack of a comprehensive policy framework on the issue of government role in business and (b) lack of commitment to the stated objectives of disinvestment. Evidently, the disinvestment program has been mostly used as a measure to manage fiscal balance rat...

A midway diversion to nowhere The desperation shown by the government functionaries especially by PM and FM in past 7-8months is exemplary. The “whatever it takes” façade presented by the duo did indeed enthused everyone for a while. However, a conspicuous lack of vision, leadership and commitment that had in fact been the key weakness of most Indian governments since mid 1980’s has exposed the reality quite early in the day. The enthusiasm has given way to frustration and dejection all over once again. In our view, the current socio-economic mess in the country is outcome of total adhocism in policy and program formulation & implementation, non compliance with the comprehensive socio-economic structure conceived in the Constitution, and lack of committed leadership, especially in past three decades. The political establishment has so far mostly failed in justifying the midway diversion from the prescribed socialist framework taken in mid 1980’s. The obduracy shown by ...

Get, set…wait! Dwindling car and home sales, slower air traffic despite sharp cut in fares, first negative reading on core sector growth in a decade, virtual collapse in capex announcement, slower project credit growth, and persistently low stock market volumes and volatility – all indicate the present state of confidence in the economy. The investors, consumer and businessmen all seem to have lost confidence. Pessimism is the only graph that seems to be moving up sharply. Historically speaking this is a valid sign of imminent economy and therefore market bottoming out. However, in our view, the markets are yet not reading these signs and therefore not yet close to bottom. We feel the concerns like depleted order books, rising NPAs, fast eroding margins, collapsing revenue etc. are well recognized and documented but not yet truly reflected in analysts’ earnings forecast. This might occur once 4QFY13 result are announced Similarly, investors have been very vocal in thei...

Why this kolaveri over current account deficit Current account has conspicuously emerged as one of the primary concerns in past couple of months. Everyone – Government, RBI, investors, analysts, economists and financial institutions – seems extremely concerned about the current account deficit. The other deficits – fiscal, governance, trust, energy, infrastructure et. al. have taken a back seat for the time being. In our view, the concern over high current account deficit, though not completely unwarranted, may be slightly misplaced. We worry that more than due emphasis on the problem may lead to desperate solutions leading to introduction of some structural imbalances in the economy, e.g., RBI postponing the replenishing of forex reserves, unwillingly liberalizing FII debt investment rules, enhancing export subsidies, etc. Following the oil price shocks in the 1970s, there have been large swings in the current account balances of most countries. Australia, New Zealand, ...

It ain’t over till the fat lady sings When the cows come home, the world might realize that the QE was nothing more than a scare crow assigned to protect the wounded and feeble global economy. The money printed itself does not create inflation. It has to reach the hands of consumers who are willing to spend it at a time when supply of goods and services is constrained. None of these conditions exist or are likely to exist in foreseeable future. Moreover, the liquidity created by Central Bankers does not automatically become capital. Somebody needs to take risk of losing it, to give it the color of capital. The liquidity chases 20-30bps arbitrage without taking additional risk. It is neither spent nor invested. The Black Swan, if any, might come flying from the commodities’ world. By definition it will be visible only on the day it is visible. Bothering too much about that will not help. The series of financial crisis that started in summer of 2007 has definitely ...

The retail conundrum - IV In past three days we have highlighted that the debate on indifference of household investors towards the publicly traded equity is not only inadequate but perhaps misdirected also. Our informal survey of some brokerages who primarily deal with household clients and many of their clients highlighted many structural and systemic reasons for their disenchantment with the listed equities. In fact regulator and the government authorities took cognizance of some of these reasons in recent past, and we do have yet seen a few steps being taken. But we are still some distance from finding a sustainable cure the malice. Some of the reasons that we found are worth noting and act upon are listed below: (a)    In past two decade, since the capital controls were removed, listed equities have not been able to match the returns provided by traditional sources of investment like real estate and gold. A deeper study would reveal that the rise in market ...