Do it yourself

Friday, March 20, 2015

Sir, we did this!

Thought for the day

"It's a funny thing about life; if you refuse to accept anything but the best, you very often get it."

- Somerset Maugham (British, 1874-1965)

Word for the day

Beamish (adj)

Bright, cheerful, and optimistic.

(Source: Dictionary.com)

Teaser for the day

Does the practice of writing recommendation for school and hospital admissions, railway tickets, etc. by MPs and MLAs violate the constitutional oath of 'Without fear or favor" and Without affection or ill will"?

Sir, we did this!

Yesterday was the annual result day for both my daughters. It was insightful to speak with some parents whose ward study in senior classes. It was even more interesting in light of what the Principal claimed in a rather boastful and boring speech.

Many parents lamented that school teachers do not put in enough effort. The children have to necessarily take multiple tuitions, leaving them with no time to pursue any hobby or sport. Even parents have to spend extraordinary time helping their wards in studies. Most senior students in fact are encouraged to miss school and study at home.

However, the credit for a good result is claimed almost entirely by the principal of the school. I found it rather unethical. Though the aggrieved parents appear to be complaining just as a ritual, absolutely not interested in putting any effort to change the things. The child scoring good marks is good enough an outcome.

On my way back home, I saw some hoardings showing how thankful and obliged some local politicians were to their elected representatives for repairing of roads, cleaning of drains, and getting the hawkers permits to squat on pavements.

Back home I heard a minister claiming in the parliament how in just 10months the government has done wonders to put the country back on high growth path, brought inflation down, eliminated the current account deficit and made doing business so easy. In full page advertisements in newspapers, the government of Uttar Pradesh made similar claims of doing wonders in a short span of three years.

An unusually large number of research reports on my table and hard disk appreciate the government in general and the prime minister in particular for achieving wonderful results. No one cares to talk about the people who have to toil real hard just for survival.

The parents are making sacrifice and the students are investing the best part of their life. Two square meals and some meaningless economic data is what they get to console themselves. The principal gets all the credit.

Duh..............!

If you feel I am being unnecessarily and excessively cynical. You might be mistaken.

The point I am trying to make here is that as an investor, our focus should be on the quality of businessmen & workforce and the business opportunity in the offing. We might miss many good opportunities or mistake a trap for opportunity if we focus the politics instead.

For example, the conduct of the government so far has not suggested that it would begin to bother about the interest of minority shareholders anytime soon. Those seeking an investment opportunity in that space may very well get trapped, yet again.

We shall talk about the opportunity next week.

Thursday, March 19, 2015

BJP vs. the ghost of 1947

Thought for the day

"You know what the critics are. If you tell the truth they only say you're cynical and it does an author no good to get a reputation for cynicism."

- Somerset Maugham (British, 1874-1965)

Word for the day

Intenerate (n)

To make soft or tender; soften.

(Source: Dictionary.com)

Teaser for the day

The united opposition march against the Land Bill appeared like launch of Bihar election campaign!

Should BJP worry?

P.S. - What MMS was doing there?

BJP vs. the ghost of 1947

At a time when the AAP political party is struggling to assimilate the Idea of AAP, and the Congress Party is struggling to shed its quintessential feudal character, BJP has a bigger battle to fight.

I have said it earlier also. The PM has shown remarkably progressive mindset. He has moved around swiftly destroying old paradigms and raising new hopes. But his colleagues and all his army men appear overwhelmed by the feudalistic idea of nationalism and following a dogmatic and in some cases regressive agenda. This is when the dispirited opposition forces are uniting to stop the juggernaut of Modi.

In past six months we heard Prime Minister giving inspirational speeches around the world. His diligence, zest and devotion to work are already part of folklore. He has taken noble initiatives like adoption of villages by elected representatives and cleanliness drive. More admirably, he has successfully skirted controversies. He has earned accolades from many adversaries and established remarkably friendly relations with many heads of states including Japan, Britain, Australia, and US.

But could we say this about his team of ministers also? Outside Rail Bhawan and South Block, besides random stories of punctuality and business friendliness, we have not heard much of a "Plan".

The allied organizations of BJP, broadly referred to as the Saffron Parivar, appear suffering from cognitive dissonance. They claim to strive for renaissance of Vedic period - revival of ancient Hindu culture based purely on pursuit of spirituality, knowledge, righteousness and equity. However, their ideas and thoughts are haplessly stuck in 1947.

They obstinately refuse to accept India, as it exist today. Sometimes it feels that in their view, to regain its past glory, first we need to go back to 1947 undo the religion based partition, then travel back to 16th century to undo the Mughal invasion, then go back to 5th century BCE to undo Budha and only thereafter we could think about rebuilding a equitable, righteous, knowledge seeking society engaged in higher spiritual pursuits.

There is so much commotion over beef trade. The newly elected Maharashtra and Haryana governments have declared it illegal. Thereby the respective chief ministers have pleased their mentors. But how does this contributes to the principal objective of renaissance.

To the contrary it seeks to draw another fault line in the society - those who eat beef and those do not. If BJP truly believes that eating beef is unconstitutional, unhealthy, unrighteous, or unjust, they should tell all their members and supporters not to eat. They may even go to the extent of making the trade economically unviable. But how could they possibly impose their idea of religion on two third population which does not vote for them or support their ideas.

In my view, the cause of India and Hinduism would be better served if we create high institutions of knowledge and produce Nobel Laureates in the fields of physics, mathematics, and medicine.....to continue

Monday, March 16, 2015

The return of political skepticism

Thought for the day

"We are not the same persons this year as last; nor are those we love. It is a happy chance if we, changing, continue to love a changed person."

- Somerset Maugham (British, 1874-1965)

Word for the day

Portent (n)

An indication or omen of something about to happen, especially something momentous.

(Source: Dictionary.com)

Teaser for the day

Does smooth passage to Insurance Bill in Rajya Sabha indicate that INC and TMC might be to NDA what SP and BSP were to UPA.

The return of political skepticism

The political milieu of the country has taken a turn for the worse over last few weeks. The investors, both domestic and global, have been watching the political developments keenly and might be little concerned about the recent developments. Especially considering that the positive sentiment on India has largely been driven the promise of a stable, transparent and responsive government post May 2014 general elections.

The ruling BJP has faced many embarrassing moments in and out of Parliament during past one month. For one, the conduct of allies like Shiv Sena, TDP and PDP has been at odd purpose with BJP. Secondly, the united opposition that enjoys majority in Rajya Sabha has been leaving no opportunity to embarrass the government. Thirdly, the extreme right wing elements within and outside BJP have been challenging the credibility of the PM's promise of inclusivity and faster development.

The principal opposition Congress Party has been struggling to overcome the spate of electoral defeats it has faced in the past couple of years. The party has seen total breakdown in the lower level organizational structure due to a variety of reason. To make the matter worse, the dithering top level leadership has also been conspicuous by their absence from addressing the Party's concerns.

Most regional parties, like JDU in Bihar, TMC in West Bengal, SAD in Punjab, and AAP in Delhi have been mired in controversies. Impropriety, personal ambitions and larger aspirations have impacted the image as well as performance of the governments.

Smooth passage of the Insurance Amendment Bill in Rajya Sabha, might have provided some consolation to the investors that all sanity is not lost. But the mood in opposition circle over the critical Land Acquisition Bill and Mining Bill does not appear kind.

The legal trouble for the former prime minister Dr. Manmohan Singh, and controversy surrounding Delhi police's curious incursion in the Congress Vice president Rahul Gandhi's office shall make the matter worse.

The tax dispute over retroactive tax demand from Cairn Energy Plc. is not helping the government stance of "no tax terrorism" and "no retro tax". A bad publicity on this account, much like the infamous Vodafone case, could impact the credibility of the government.

The forthcoming Bihar state assembly elections due later this year are indicated to be one of the most acrimonious elections seen in recent times. A united opposition and BJP infested with internal strife could further queer the pitch for the central government.

Outside financial markets, the recent squabble between rival factions within AAP, has certainly put a little dent on the optimism of urban middle classes over improvement in socio-political conditions. Restoration of skepticism prevalent till summer of 2013 may have serious economic repercussions in my view. It is therefore important for investors to understand the implications of AAP.................to continue

Friday, March 13, 2015

Reporting from the hinterland

Thought for the day

"Great minds have purposes; others have wishes."

- Washington Irving (American, 1783-1859)

Word for the day

Brouhaha (n)

Excited public interest, discussion, or the like, as the clamor attending some sensational event; hullabaloo:

(Source: Dictionary.com)

Teaser for the day

A youthful Congress driven by the Idea of AAP would provide a strong and stable opposite pole in the Indian politics.

Reporting from the hinterland

A short two day trip to rural areas of western UP and discussions with a few farmers, agro commodity traders and food processors provided some interesting insights into the current economic, social and political conditions.

Though the visit was confined to the villages closer to industrial towns, in my view, the prevailing conditions could be reasonably extrapolated to the entire State of UP, and the adjoining states of Uttrakhand, MP. Haryana, Bihar and Rajasthan.

The unseasonal rains have caused serious damage to the standing crops of wheat, mustard, and pulses. The damage to Sugarcane is not very serious from rains, but the threat from fungus and pests has increased manifold. There is minor damage to Potato crop.

Given the late monsoon rains, most farmers were expecting a good winter rabi crop this year and accordingly have invested higher than normal in the crop. The losses, coming on the back of a poor summer Kharif crop, have compounded impacting the purchasing and borrowing power of the farmers. The majority of landless and marginal farmers may be in distress given lesser demand for labor from construction sector and lower MNREGA spending.

The interesting thing is that most farmers are now aware of the technology advances. They keenly follow the price movements across global and local markets. Most farmers follow midterm weather forecasts and El Nino developments. The forecast about likely below par monsoon this year has dampened the spirits furthers. Most rural households appear to have fastened the strings of their purses tightly.

Another interesting insight was provided by a senior district administrator. He highlighted that in most of rural and semi-rural areas of UP the popular inclusion scheme PM Jandhan Yojna (PMJY) has been marketed and sold as some sort of blessed goose that will regularly keep laying golden eggs. It has not been marketed as a tool to promote inclusion or enhance household savings. The outcome in the short to midterm will therefore only be limited to plugging the leakages in grants that are transferred directly.

On political side, the popularity of PM Modi may be on the wane in UP. Akhilesh government is a clear beneficiary of this. The state government has seriously enhanced its engagement with people post May 2014 Lok Sabha election rout. Save for a dramatic improvement in the economy and performance of the national government, 2017 state assembly election may not be a easy going for BJP.

The social strife seen during the run up to the Lok Sbha election has conspicuously diminished. Muzzafarnagar, Saharanpur and Shamli were found calm and quiet; not many people complaining about the state's apathy.

Wednesday, March 11, 2015

Head, tail or the edge - III

Thought for the day

"Young lawyers attend the courts, not because they have business there, but because they have no business."

- Washington Irving (American, 1783-1859)

Word for the day

Ballast (n)

Anything that gives mental, moral, economic or political stability or steadiness:

(Source: Dictionary.com)

Teaser for the day

Would be more pertinent question to ask "Will Mufti Government unhesitatingly arrest Masarat Alam et. al. again if they are found to be indulging in unlawful activities?"

Head, tail or the edge - III

I have been cautioning my readers that global financial markets might be heading for a "perfect storm" this summer. I am expecting a deeper correction in Indian equities also. This to me will be an opportunity to stock up, even by leveraging a little.

I do not expect the markets to panic like it did post Lehman collapse in 2008-09. I find the participants much better informed, prepared, and hedged. In specific Indian context, the derivative open interest is now predominantly in index options and stock options, as against stock futures in 2008.

Moreover, the political situation now is much better and macro indicators are close to bottom against close to peak in 2008.

Twister

As discussed in past couple of days, there are strong headwinds and tailwinds present in the Indian economic system that should prevent any larger or faster move in Indian equity prices in next 6-9 months.

However, there are some strong pressure areas building up near term (next 3 months) that may cause much greater volatility and deeper correction in the equity prices.

In particular the following factors need to watched carefully:

(a) Intensity of the discussions around US Fed rate hike.

(b) Poor results for 4QFY15 and consequent earnings downgrades.

(d) Political hostilities rising as the Parliament meets after the recess to complete the budget session agenda.

Short term outlook (upto 12 months)

Market may witness higher volatility and larger moves in next 6-12 months. While not much further negative than already anticipated is expected to occur on domestic front, global uncertainties may rise with deceleration in Europe, Japan, China and major commodity producing emerging markets. Nifty should move between a larger range of 7420 - 9400. Strong buying and leveraging opportunities will emerge in to 7850-8000 Nifty range.

Mid-term outlook (12-24 months)

Expect Nifty to make a strong positive move over next two year with upper bound at 10800. The risk reward at present from this perspective is positive. Much sharper move could be expected in broader markets.

Strategy

(a) Stay out of the way of expected twister in next couple of months.

(b) Take shelter in strong defensive equity and short term accrual debt.

Tuesday, March 10, 2015

Head, tail or the edge - II

Thought for the day

"I am always at a loss at how much to believe of my own stories."

- Washington Irving (American, 1783-1859)

Word for the day

Eyesome (adj)

Oleasant to look at.

(Source: Dictionary.com)

Teaser for the day

Mukesh Singh! What about politicians, academicians, Khap leaders, religious leaders and all those men who commit marital rape and doemstic violence everyday

Head, tail or the edge - II

As discussed yesterday, there are headwinds present in the system that may slow down the up move of Indian equities in the months to come. Arguably, the headwinds are mostly macro in the nature and not insurmountable.

Tailwinds

Fortunately for Indian equities, the tailwinds present in the system are strong, visible, and operating on both macro as well as micro levels. These may potentially catapult the equity prices in short to midterm (6-36months).

The improvement in macro indicators like core inflation, current account deficit, fiscal deficit is generating strong tailwind.

Someone may argue that this improvement in macro indicators may not be sustainable. I would argue "yes" and "no". For example:

(a) The current account improvement is largely attributable to global deflation in commodity prices, especially energy prices, and lower project related engineering imports due to lower investment demand in past five years. Improvement in domestic and global economy may reverse these gains rather fast.

In my view, it is true that at present the gains on current account are temporary in nature. However, given the strong emphasis on renewal energy, implementation of gold monetization scheme, and a stronger money laundering law, these gains may likely sustain over a longer period.

(b) The present fiscal correction is also attributable to lower fuel subsidy bill, higher non-recurring receipts from sale of natural resources, mainly coal & telecom spectrum, disinvestment in PSU and SUUTI and lower social sector spending etc. There is little sign of tax buoyancy to suggest sustainability of better fiscal conditions over mid to long term.

In my view, it is true that currently fiscal correction is mostly an outcome of expenditure rationalization. A change in political conditions or a global economic shock may lead to a fast reversal.

Nevertheless, the measures like GST (to increase tax compliance), direct cash transfer (to plug leakages), decentralization of social schemes (for targeted implementation), fuel price de-regulation, and active engagement corporate sector in building social sector infrastructure (via mandatory CSR and tax incentives) would certainly yield positive results over mid to long term.

(c) At micro level, the strongest tailwind is coming from the improvement in execution. The framework for faster execution of infrastructure projects involving railways, energy, roads and defense is almost in place. The results could be visible in next 9-18 months, depending upon how fast the government could get the issues relating to acquisition of land sorted out. Improvement in financial sector (growth, inclusion, and social security) shall also yield positive results....to continue

Monday, March 9, 2015

Head, tail or the edge

Thought for the day

"The idol of today pushes the hero of yesterday out of our recollection; and will, in turn, be supplanted by his successor of tomorrow."

- Washington Irving (American, 1783-1859)

Word for the day

Sternuation (n)

The act of sneezing.

(Source: Dictionary.com)

Teaser for the day

How many in India would have watched the controversial BBC documentary if the issues was not raked by media at all?

Head, tail or the edge

"Could Congress get 300 seats in 2019 Lok Sabha elections?" I asked the people who called me to wish a Happy Holi. All of them had a belly laugh believing it to be some sort of Holi joke.

By the evening I was convinced that if at all it occurs, it would be perfect example of a Black Swan event in Indian politics. At this point in time people are not even willing to give it odds they would usually give to a tossed coin falling on its edge!

Getting over the Holi mood, I tried to fathom a Black Swan event for the Indian financial markets, which might violate the ban on Bull slaughter recently imposed by the Maharashtra government.

I could appreciate the strong Headwinds and Tailwinds, most analysts and market commentators are talking about. Stretching my imagination a bit far, I could fathom these headwinds and tailwinds culminating together form a twister. But the coin falling on its edge! I guess it still remains unfathomable; and naturally so. If fathomable, these swans would not be black.

The investment strategy therefore needs to focus on the strong headwinds and tailwinds. The discussion about the probability of the coin falling on its edge may wait for next Holi.

Headwinds

The strongest headwind for the Indian economy and therefore Indian financial markets is coming from the rural economy. My survey across nine states indicates that the unusual rains in February and March have caused extensive damage to standing Rabi crops. This coming on the back of a poor Kharif crop in many states, is likely to have serious impact on the rural income, consumption and debt servicing ability. The damage is extensive in case of fruits, vegetable, oilseeds, wheat and pulses. This should reflect on March and April consumer price inflation also.

I my assessment, demand for farm inputs and farm equipments may be adversely impacted. The delinquencies in farm credit may rise. The demand for durables - auto, housing, electronics - from rural areas will definitely be impacted.

The election for Bihar legislative assembly due in October this year presents another major headwind (headache) for the government. Many parties, especially the non-Congress opposition parties, are taking this election as a fight for survival. In my assessment their aggressive stance shall obliterate any chance of cooperation with the arch rival BJP. In fact the hostilities may likely rise materially in run-up to the election, impacting the execution of the development agenda.

The reversal of USD carry trade ahead of the policy rate hike by US Federal Reserve later this year could also adversely impact the flows in emerging markets, including India....to continue

Thursday, March 5, 2015

Execution is the key

Thought for the day

"We can't solve problems by using the same kind of thinking we used when we created them."

- Albert Einstein (German 1879-1955)

Word for the day

Effulgent (adj)

Shining forth brilliantly; radiant.

(Source: Dictionary.com)

Teaser for the day

Does Congress support for Insurance Bill marks any material change in strategy?

Execution is the key

The governments in past 25years have mostly adopted similar socio-economic policies consistently irrespective of their form (single party or multi party) or constitution (minority or majority).

For example consider the following:

1. The process of meaningful tax reforms was started by the then finance minister V. P. Singh (Congress 1984-89) by rationalizing the tax slabs, lowering maximum marginal tax rates substantially, rationalizing wealth tax and introducing CENVAT. The recommendations of Raja J. Chelliah Committee (1991-93) on tax reforms constituted by the government (Congress 1991-96) have since formed the basis of tax reforms in India. All successive governments have implemented these recommendations. No government has sought to reverse or alter the process started by Congress government (1984-89). These recommendations formed the core of the now discarded Direct Tax Code. The origin of the tax proposal like lower tax rate with lesser exemptions and no wealth tax proposed in could also be traced to that.

Committees formed under the chairmanship of other members of Raja Chelliah committee like Govinda Rao, Partha Shome and Vijay kelkar etc. subsequently updated the recommendations to provide further impetus to the entire process of tax reforms in the country.

It was the Finance Minister of H. D. Devegoda led United Front government who presented the most talked about "dream budget".

2. The recommendations of Narsimham Committee (1991-92) appointed by Dr. Manmohan Singh, the then finance minister in the Congress government, have largely formed the basis of financial and banking sector reforms in the country. Most successive governments have implemented the recommendations consistently. In fact, P. Chidambram, the then finance minister in United Front government (1998) had re-appointed the Narsimham Committee to make recommendations about the second generation banking sector reforms. The report was submitted in 1999 to the NDA government which accepted the recommendations. However, almost all governments have failed in building wider consensus on these recommendations and have failed to implement many of them. But acceptance and rejection has been very consistence irrespective of the form and constitution of government.

3. The BJP led NDA government enacted the Fiscal Responsibility and Budget Management Act (FRBMA) in 2003. The arch rival Congress led UPA-I government implemented the same in 2004 in letter and spirit. This still forms the very basic of fiscal discipline both at central and state levels, though implementation was suspended in 2009 in the wake of global crisis and need for stimulus. In FY13 stimulus withdrawal commenced. The incumbent Finance Minister has committed to achieve the targets in next three years.

4. The minority government of Chandrashekhar introduced disinvestment policy first time in 1991. Every successive government since then has not only accepted the policy in principle but also tried to actively integrate

into the evolving economic model. Almost all of them have consistently failed in implementing the policy in right spirit.

5. The then Finance Minister Pranab Mukherjee sought to implement GAAR or general anti tax avoidance rules. However, he had to defer the implementation due to concerns expressed by foreign investors and businesses. Both the successive finance ministers have kicked the can a little further.

6. Single national market (GST) is also an idea whose time has come. The incumbent government is poised to implement the legislation framed by the previous government.

7. Programs such as cleaning the holy rivers of Ganga & Yamuna and provision of toilets in every home have been accorded priority by all successive governments. Millions have been spent on these programs with no evident results. The incumbent government has adopted the program on mission basis. The execution could make a difference.

From the above cited example, it is evident clear that the direction of policy has been mostly same on most accounts during the past three decades. The difference lies in the execution.

Indubitably, the execution was seen much better during Vajpayee led NDA government whereas it lagged during the subsequent UPA Government.

The incumbent government has taken a number of steps to improve the execution of key policies and programs. The outcome will decide whether the things are being done differently!

It is however important to note that the P. V. Narsimha Rao led Congress government and Atal Bihari Vajpayee led NDA government made many historic departure from the past and took many new policy initiatives.

The end of Nehru era's license, quota & permit raj, abolition of capital controls and introduction of LERMS, entry of private players in civil aviation, opening of financial sector, etc. were some major path breaking reforms introduced by Narsimha Rao government.

Divestment of major government monopolies like power, roads, wireless communication, ports, airports, insurance & hydrocarbons, focus on rural connectivity, deregulation of fuel pricing, and liberal FDI regime were the key new policy initiatives during the Vajpayee led NDA regime.

The 10years of UPA regime did not witness any major policy departure. The execution of existing policy norm was poor.

In past 10months of PM Modi led NDA we have not seen any major policy departure, except dismantling of 6 decade old Planning Commission. However, the dominance of market economists in the consultative bodies of the government suggests that we will see a new policy paradigm in next four years.

Also read:

Union Budget 2015-16: Continuity, simplification & incrementalism

Pepsi, Coke, Apple and the rest

Different things, or just done differently

Wednesday, March 4, 2015

Different things, or just done differently

Thought for the day

"Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves."

- Albert Einstein (German 1879-1955)

Word for the day

Augur (v)

To conjecture from signs or omens; predict.

(Source: Dictionary.com)

Teaser for the day

Regular vipasana, meditation, yoga, only home cooked vegetarian food, blood sugar level 300mg/dl.

Find the odd man out?

Different things, or just done differently

Continuing from yesterday, to analyze if the incumbent NDA government is following materially different socio-economic policies from those followed by the previous UPA government, we need to distinguish between the policy framework and administrative framework for implementation of policies. We need to find whether the government is doing different things, or doing the same things differently, or doing the same things in the same manner.

Let's analyze the issue by examining some popular performance claims of the incumbent NDA government.

(1) Coal block auctions - The process started after CAG reported irregularities in the allocation of 2G spectrum and coal blocks. Supreme court cancelled the spectrum allocation and licenses of 22 telecom operators and 208 coal blocks allocated in past two decades in arbitrary manner. UPA government started the process of selling spectrum through competitive bidding in a transparent auction. It was inevitable that in future coal and other important national resources could only be sold at market price through a transparent process. The current government has not made any material policy deviation here.

(2) Federalism - The process of devolution of greater financial powers on the federal states started with rise of regional parties and decline of Congress party during late 1980s. Successive union governments have been devolving powers on the states. Transferring some social schemes to states and accordingly increasing their share in allocation of tax revenue is not a different policy measure. Neither is opening IIT, IIM and AIIMS in each state of the union. UPA appointed the 14th Finance Commission and NDA accepted its recommendations. No big deal.

(3) Globalization of the policy formulation and presentation - The process was perhaps started by Rajiv Gandhi who appointed Sam Pitroda to head telecom revolution in the country. Dr. Manmohan Singh, Montek Singh Ahluwalia and Raghuram Rajan were three other notable imports from IMF by various Congress led governments. The jargon had started changing from summer of 2013 when Rajan took charge at RBI. It is now distinctly global. A nuanced policy change here is that now right leaning market economists dominate the consultative teams as against the left leaning development economists.

(4) Lower inflation - In my view, there is nothing structural or policy driven in the current low rate of inflation. Lower global commodity prices; the demand suppression due to poor rural income growth; lower job & income growth, financial suppression due to negative real consumer rates and a high base effect have led the statistical inflation down. No major improvement has yet been seen on the supply side. The inflation targetting started with Rajan assuming charge at RBI. The policy has now been reduced in writing. Again a nuanced change.

(5) Financial inclusion - The process started a decade back. No doubt the execution took a big leap in past six months. Again no policy issue here..............to continue

Tuesday, March 3, 2015

Pepsi, Coke, Apple and the rest

The people who have followed the great cola rivalry over decades through their advertisement campaigns would know that this rivalry is about garnering higher market share - not much through product differentiation but mostly through perception manipulation.

On the basis of a slight nuance of taste that has historically differentiated the two cola products these rival companies have created strongly committed and prejudiced consumer camps. People in these camps would argue tirelessly, almost with a missionary zeal, in favor of the supremacy of the product of their choice. People on both the sides of the fence know well that both the products are quintessentially the same. Both provide an instant gratification and leave a tinge on the tongue. Failure to absorb the extra calories through some hard work invariably leads to bloating, obesity and other metabolic disorders that may take a long time and huge effort to cure.

More recently, the present day wired world has also got divided by another rather thick line called Apple. The users of technology world over are vertically divided into two camps - 'Apple' and 'Others'. Those in the Apple camp swear by its product and would never think of crossing over to the other camp. On the other hand, a large majority in the Others' camp aspires to cross over to Apple.

Unlike Cola giants, Apple has created a space for itself through differentiated products. It is not just about semantics. Rather it is mostly about innovation and leadership.

The first full budget of the incumbent NDA government should stir a debate - whether Indian politics is still like a cola war or the incumbent government is bringing a differentiated and innovative product on the table.

Historically, both the Congress led UPA and BJP led NDA have followed the same set of socio-economic policies. It was much like Pepsi vs. Coke rivalry. Mostly about semantics and perhaps a slight nuance of taste. Otherwise the substance of the policy - design as well as goal - and the sloganeering pitch mostly remained the same.

On most of the occasions both the groups have been found sitting on the left and right window of the same train which was moving in one direction. Both of them claimed to see things differently or someone may say claimed to see different things differently.

But in effect they saw different patches of the same field, different lanes of the same colony, different barns of the same crop and different trees of the same orchard - spread across the railway track on which the train was moving.

They addressed different members of the same family in their endeavor to sell the same product differently. It was the efficacy of the campaign, and not the quality or utility of the product, that decided the winner.

We need to debate whether the budget for FY16 seeks to change anything. .................to continue